Downside risk to oil prices if surplus persists in 2017 - IEA

The Paris-based International Energy Agency (IEA) published its monthly report on oil markets this Thursday in which it warned of 'relentless' growth in oil supply if the OPEC fails to reach an output cut deal at its Nov. 30 Vienna meeting.

In September, the Organization of Petroleum Exporting Countries agreed in Algiers to reduce the amount of oil it pumps by as much as 2 percent to tackle a global glut in oil supplies in efforts to prop up sagging oil prices. Discord among members over exemptions and production levels have raised doubt over OPEC's ability to deliver a meaningful reduction.

OPEC's crude output rose for the fifth consecutive month in October by a 230,000 barrels a day to a record high of 33.83 million barrels a day, well in excess of the high end of its proposed output range. OPEC would need to cut by between 830,000 barrels a day to 1.33 million barrels a day to reach the ceiling range it agreed in Algiers.

"We can't predict the outcome of the November 30 meeting, but we can see the scale of the task ahead," said the IEA, which advises industrialized nations on their energy policy.

IEA notes that oil markets are likely to register surplus for the third consecutive year, if the OPEC fails to reach an output cut deal at its Nov. 30 Vienna meeting. IEA then sees little prospect of oil prices rising significantly higher. Indeed, if the supply surplus persists in 2017 it sees risk of prices falling back.