The world is on the brink of the longest-lasting oil glut in at least
three decades and OPEC’s quest for market share makes it almost
unavoidable.
Oil
supply has exceeded demand globally for the past five quarters, already
the most enduring glut since the 1997 Asian economic crisis,
International Energy Agency data show. If the Organization of Petroleum
Exporting Countries were to keep pumping at current rates it would
become the longest surplus since at least 1985 by the third quarter, the
data show.
There are few signs the 12-nation group will cut back. Saudi Arabia,
OPEC’s biggest member, will probably increase production to intensify
pressure on U.S. shale drillers, Goldman Sachs Group Inc. predicts.
OPEC’s supplies may be swollen further this year if Iran reaches a deal
with world powers to ease sanctions on its exports, Commerzbank AG says.
“It seems to be taking longer for the oil surplus to clear, and, even
without the return of Iran, IEA data indicates it could last for the
rest of the year,” said Eugen Weinberg, head of commodities research at
Commerzbank in Frankfurt. “Any expectations the oversupply will be gone
by 2016 don’t look justified at this stage.”
Brent crude for August settlement dropped 18 cents to $63.77 a barrel
on the London-based ICE Futures Europe exchange at 10:17 a.m. London
time. The benchmark has risen about 40 percent since reaching a six-year
low of $45.19 on Jan. 13.
OPEC pumped 31.3 million barrels a day in May and will probably
continue to pump around that level “in coming months,” the IEA said in a
report on June 11. The agency doesn’t forecast OPEC production.
Global Oversupply
Producing at that level would imply a
global oversupply of 1 million barrels a day in the third quarter and
600,000 barrels in the following three months, according to IEA
projections for global demand and non-OPEC supply compiled by Bloomberg.
That would be the eighth consecutive quarterly surplus, exceeding the
current record of six quarters from 1997 to 1998.
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,
Commerzbank predicts. 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.
