There are now more than 3bn barrels of excess oil in the world
Record ‘cushion’ of surplus oil will protect the world against ‘geopolitical shocks or unexpected supply disruptions’ says IEA
By Mehreen Khan | Telegraph –
The world is awash with oil, as excess supply has reached record levels despite prices collapsing by nearly half over the last year.
There are now more than 3bn barrels of excess supply in world oil markets, according to the International Energy Agency.
• Back to the 70s: four charts showing where oil is heading
Collapsing prices are good news for consumers, and have helped energy demand rebound this year.
The IEA now expects world demand to rise to a five-year high of 1.8m b/d in 2015, before tailing off next year.
However, the IEA said the appetite for oil “has been outpaced by vigorous production from OPEC and resilient non-OPEC supply”.
The price of brent crude fell by more than 4pc after the report was released, sinking below $45 for the first time since August.
• Global oil glut highest in a decade as inventories soar
Inflated inventories have spread across the world from the US to the developed economies of Europe, and now China, said the IEA.
The watchdog noted that Russia’s pumps would reach a post-Soviet record high in 2015, and were “likely to remain robust in 2016 as well”.
Saudi Arabia has led the ramp up in production as it seeks to dominate market share and crowd out rivals in the US.
The Kingdom accounts for the largest share of the world’s excess supply, but the IEA noted that the Saudis’ spare production buffer was now “stretched thin”.
Non-Opec production however, is expected to suffer its single biggest drop in growth since 1992, next year, said the IEA.
Earlier this week, the Agency said the world risked a slide back into the conditions of the 1970s in its over-reliance on a volatile Middle East that is fighting the threat of Islamic State.
However the diversification of the supply glut meant that “brimming crude oil stocks offer an unprecedented buffer against geopolitical shocks or unexpected supply disruptions”, the IEA said on Friday.
It would also help protect producers against an unseasonally cold winter.
It is not only crude oil production that has spiked; other refined fuels are also leading to inventory growth.
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