The supply of oil has exceeded demand globally for the past five quarters, largely due to the Organization of Petroleum Exporting Countries vying to gain more market share, according to International Energy Agency data.
OPEC supply rose 50,000 barrels per day in May, to total 31.33 million barrels per day — the highest level since August 2012, the International Energy Agency said. Saudi Arabia, Iraq, and the United Arab Emirates pumped at record monthly rates to keep output more than 1 million barrels per day above OPEC’s official supply target for a third month running. Oil ministers agreed to maintain that target at their June 5 meeting.
Meanwhile, the IEA estimated global demand will grow by 1.4 million barrels per day for all of 2015.
“Momentum is expected to ease somewhat [in] the current quarter, assuming a return to normal weather conditions and given the recent partial recovery in oil prices,” the agency said.
A Bloomberg article on Monday said that if OPEC were to keep pumping at current rates, by the third quarter the world would have the longest surplus since at least 1985. Goldman Sachs predicted that Saudi Arabia, OPEC’s biggest member, would probably increase production to intensify pressure on U.S. shale drillers.
Commerzbank’s head of commodities research Eugen Weinberg told Bloomberg that the glut could swell further if Iran and world powers reach an accord on the Islamic Republic’s nuclear program by their June 30 deadline. The country could boost exports by 1 million barrels a day within seven months of sanctions being removed, Oil Minister Bijan Namdar Zanganeh said in Vienna on June 3.
“It seems to be taking longer for the oil surplus to clear, and, even without the return of Iran, IEA data [indicate] it could last for the rest of the year,” Weinberg told Bloomberg. “Any expectations the oversupply will be gone by 2016 don’t look justified at this stage.”