“Production Cut May Not Resolve Supply Glut” – IEA

The International Energy Agency, IEA has said that despite Nigeria’s lobbying of some Organization of the Petroleum Exporting Countries, OPEC, to cut production, to shore up global crude oil prices,  cutting production may not resolve the current oil glut.

However, production outstrips consumption by around 2 million barrels a day, according to the Organisation for Economic Cooperation and Development, OECD’s energy arm of the IEA.

However, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, believes all hope is not lost as oil producing countries are beginning to find solution to the low price.

He said: “I don’t need to tell you about the price of oil despite the shuttle diplomacy here and there. It is still very challenging but at least we are inching up and for the first time, we are beginning to have both the Saudis and the Russians come back to the table.

“When I started that whole move, I was criticised and told that it would not hold but I am happy that over the last few weeks, we see that everybody has bought into that and we are beginning to see prices inch up very slowly.

“But hopefully, if the meeting that we are scheduling to happen in Russia between the OPEC and non-OPEC members happens on the 20th of March, we should see some dramatic movements, though we are not likely going to see the prices of many years ago.

“I think we are very humbled today to accept that if we hit the price of $50 we will be celebrating and that is the target that we have.” But the IEA forecast that “stockpiles will continue to build until the end of 2017, even if demand rises. Once the market rebalances supply and demand, there is still going to be more than 3 billion barrels of oil in storage tanks that will take years to clear.”

The Agency also expects non-OPEC production to fall by 600,000 barrels a day in 2016, and global demand to rise by about twice that amount.

The IEA further noted: “On the assumption, perhaps optimistic, that OPEC crude production is flat at 32.7 million barrels per day, mb/d in the first quarter of the year, Q1 16, there is an implied stock build of 2 mb/d followed by a 1.5 mb/d build in Q2 16.