The oil surplus is set to last longer than previously predicted, as demand growth slumps and output proves resilient, the agency said.
“The IEA said the supply overhang will persist longer than previously expected,” said Gene McGillian, a senior analyst and broker at Tradition Energy in Connecticut.
“Also, there are expectations that US inventories will post a big build as all the imports that were delayed arrive.”
Oil has fluctuated since rallying in August amid speculation the Organization of Petroleum Exporting Countries (Opec) and Russia would agree on measures to stabilise the market at a meeting later this month.
All solutions are possible, Algeria’s energy minister said last week when asked whether producers could raise output within the framework of a freeze. Rising Opec production has offset the effect of declining supplies elsewhere, maintaining the oversupply, the IEA said.
Yesterday, Brent for November settlement slipped $1, or 2.1%, to $47.32 a barrel on the London-based ICE Futures Europe exchange.
Global oil consumption growth sagged to a two-year low in the third quarter as demand faltered in China and India, while record output from Opec’s Gulf members is compounding the glut, the agency said in the monthly report.
“This was a marked shift in outlook by the IEA,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas in London.
“Opec’s long game got a little longer, implying the need for oil prices to remain lower for longer to spur the necessary adjustments in supply for the re-balancing of the market.”
Opec flipped its forecasts for rivals’ supplies in 2017, predicting a rise in output from outside the group instead of a decline, according to a monthly report earlier this week.
Production from outside the group will rise 200,000 barrels a day next year, against 150,000 a day expected a month ago.