IEA expects supply glut to continue through 2017

According to International Energy Agency (IEA), rising stockpiles, globally means, supply glut will continue through 2017, according to latest commentaries this week.

Major reasons behind the arguments are, lower than expected output drop from non-OPEC producers and lower demand growth compared to last year. The energy body, feels due to these reasons, possibility of any significant recovery in the short term unlikely. Even if the production drops, massive stockpiles across globe, would act as a cap to recovery.

Moreover, supplies will keep rising. According to IEA, global supplies are likely to 4.1 million barrels/day over next five years, but that is much lower than rise of 11 million barrels/day in the previous five. Production from US is expected to recover, even after short term dip to all-time high of 14.2 million barrels/day by 2021. So, US will be major contributor of supply growth over the next five years. Iran is also expected to increase production by at least 1 million barrels/day.

Compared to supply, demand is expected to grow at 1.2 million barrels/day per year over the next five. Demand growth in India is expected to be major contributor.

Only good news for bulls is that IEA seeing increasing risk of oil price spike at the end of decade, due to sharp drop in investments today.

After yesterday's gains, oil price is sharply lower today. WTI is currently trading at $32.8/barrel. Down -1.9% so far and Brent is at $1.3/barrel premium.