Oil up but IEA warns of limited gains

The Dollar Business Bureau

Global oil prices rose slightly higher in Asia on Wednesday but fresh warnings of a global supply glut dashed hopes for a prolonged rebound in the crude prices.

Earlier, the market was hoping for a reprieve in crude oil prices. The International Energy Agency (IEA) on Tuesday said the growth in oil demand was decreasing while supply was increasing.

The IEA’s monthly oil-market report said that the oil glut had started to disappear. The Organization of the Petroleum Exporting Countries (OPEC) had also reported that oil production outside the cartel had become resilient than expected.

The IEA blamed falling oil consumption in Europe and wobbling Asian oil demand for this shift.

The global oil-demand is escalating by 1.3 million barrels a day. Earlier the Paris-based agency had downgraded the global oil-demand forecasts by almost 100,000 barrels a day for the year 2016. It had also lessened the predictions by about 200,000 barrels a day for 2017.

IEA's forecast came after the Organisation of the Petroleum Exporting Countries predicted that non-member countries would witness a rise in its output in 2017.

The oil prices have continued to remain below $50 a barrel for much of the year, which is incidentally over 50% below 2014 levels.

“The stimulus from cheaper fuel is fading,” the IEA report said.

Despite discussions of an oil production freeze, the organisation said that supply and demand might not change in the coming months. “As a result, supply will continue to outpace demand at least through the first half of next year. As for the market’s return to balance—it looks like we may have to wait a while longer,” the IEA said.

A potential strong demand of oil consumption from India and China had helped strengthen the oil market when oil prices were tumbling under $30 a barrel earlier this year.