Record global oil stockpiles could offer an “unprecedented buffer” in times of geopolitical shock, the International Energy Agency (IEA) said on Friday, as it forecast demand growth would slow next year, worsening the glut.
“Stockpiles of oil at a record 3 billion barrels are providing world markets with a degree of comfort. This massive cushion has inflated even as the global oil market adjusts to $50/bbl oil.” the agency noted in its November report released Friday.
Global growth is forecast to slow in 2016 to 3.6 percent, according to the latest International Monetary Fund forecasts, which has warned that “downside” risks to the world economy have grown in recent months. Although the sharp drop in oil prices is a result of oversupply rather than a lack of demand, fears surrounding the health of the global economy are keeping investors on edge.
While supply appears to have outpaced demand growth in 2015, keeping oil prices subdued at their current level of $44.23 a barrel for benchmark Brent while U.S. sweet crude trades at $41.62, demand growth could slow next year, the IEA said, a factor that could be bearish for oil markets.
“Demand growth has risen to a five-year high of nearly 2 mb/d, with India galloping to its fastest pace in more than a decade. But gains in demand have been outpaced by vigorous production from OPEC and resilient non-OPEC supply – with Russian output at a post-Soviet record and likely to remain robust in 2016 as well. The net result is brimming crude oil stocks that offer an unprecedented buffer against geopolitical shocks or unexpected supply disruptions.”