A massive oil glut may weigh on world markets deep into next year unless the Opec producer cartel makes good on its promise to cut output, the International Energy Agency (IEA) said on Tuesday.
OPEC boosted its output by 160,000 barrels a day to a record 33.64 million barrels a day in September, the IEA said.
Reducing daily output for all 14 members by a cumulative 750,000 to 900,000 barrels may be insufficient to return oil prices above the $60 bpd mark as some had predicted for 2017.
"Now the real work starts", the IEA, which advises industrialized nations on energy policy, wrote in its monthly report.
The oil price received a shot in the arm yesterday after Russia's president, Vladimir Putin, said his country would participate in the freeze on oil production by OPEC.
OPEC's top oil producer Saudi Arabia said on Monday a global production deal to limit supplies could be reached by the group's next formal meeting in November, when an invitation to join cuts could be extended to non-OPEC nations such as Russian Federation.
Falih said there was still not total clarity on supply and demand in some areas such as China and North America at the moment and that he hoped the situation would be clearer by the time of OPEC's November 30 meeting.
The IEA projects global demand growth of 1.2 million barrels a day for the year, down from 1.4 million barrels a day as recently as July. The IEA forecast that the market will remain oversupplied through mid-2017 if OPEC doesn't enact the cuts it pledged last month in Algeria.
"OPEC has abandoned its free-market policy set in train almost two years ago".
If they really give us 1 million bpd, I think you're going to have to say oil is going to be in the high 50s, early 60s.
Oil prices hit their highest level in a year on Monday but fell Tuesday.
Iran, with a heavily oil-reliant economy, believes its fair production share in OPEC should be higher than its current output and has accelerated its efforts to reach its production before 2012, when the European Union imposed additional sanctions on the country for its nuclear activities. In afternoon trading, benchmark US crude was down 64 cents to $50.71 a barrel in NY.
Goldman Sachs analysts said oil prices could fall back to $43 if OPEC fails to finalize an output-cutting deal in Vienna. Given that shale oil has made the United States, which is not a member of OPEC, the world's largest oil producer, the ability of the cartel to control global prices is not as strong as it once was.