Lower for Longer and Longer

摘要

Lower for longer... and longer: That's the unequivocal outlook for oil prices that emerges from the latest soundings of global supply and demand as well as the latest projections of the market balance going into 2016. The surpluses are relentless. Despite surprisingly robust oil demand last month and in the third quarter, global oil supply still exceeded demand by over 2 million barrels per day in October. The outlook for the current quarter and the first half of next year calls for ongoing hefty supply surpluses in the 1.5 million to 2 million b/d range, which will add to already bloated inventories and keep downward pressure on oil prices. For the third quarter, global supply of 97.4 million b/d exceeded demand by 1.7 million b/d. But observed stocks showed an even bigger rise of 2.3 million b/d. In October, global supply hit a new record high of 98.3 million b/d despite a slight drop in Opec volumes. For the fourth quarter — typically the time of the biggest inventory draw of the year — a supply surplus is expected of 1.9 million b/d, so stocks will continue to build, unchecked by winter demand. Supply and demand look unlikely to come back into balance until the end of 2016, at the earliest, and by then there will an inventory overhang of unprecedented proportions to work off — a prospect that could take years rather than months (OMI Oct.15'15).