Oil glut seen to ‘shrink dramatically’
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A global oil glut that has sent prices tumbling is set to “shrink dramatically” later this year, as wildfires have disrupted Canada’s output and demand in India soars, the International Energy Agency said yesterday.
Demand for oil worldwide is expected to grow at a “solid” rate in 2016, with India the “star performer” after making up nearly 30 percent of the global increase in demand in the first quarter of the year, according to the IEA.
“This provides further support for the argument that India is taking over from China as the main growth market for oil,” the 29-nation IEA said in its closely watched monthly report.
The oil market has for months been depressed by vast oversupply, badly hurting producers but meaning lower prices at the pump for consumers.
Oil prices surged to six-month highs this week and are well over US$46 a barrel after plummeting below US$30 early in the year. They are nevertheless far below the US$100 a barrel mark of mid-2014.
In Canada, devastating wildfires near Fort McMurray forced a shutdown of 1.2 million barrels per day of production early this month.
The IEA said the events in Canada, however, had not sent oil prices sharply higher, as would have been expected some years ago, with crude having shown little reaction amid overall improved market sentiment.
Iran had provided the other surprise, according to the IEA.
Its oil production and exports increased slightly faster than expected following Iran’s return to the market after the lifting of sanctions in January under its nuclear deal.
Iranian oil production in April was nearly 3.6 mbpd, a level last achieved in November 2011 before Western sanctions against Tehran were tightened, the IEA noted.
“Even more important for global markets, oil exports reached 2 mbpd, a dramatic increase from the 1.4 mbpd seen in March,” the IEA added.
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