‘Grim Economic News’ Pressures Oil — IEA

By Douglas A. McIntyre Updated Jan 13, 2:55PM EST · Published Jan 19, 4:31AM EST

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‘Grim Economic News’ Pressures Oil — IEA — © Thinkstock

The International Energy Agency (IEA) commented in its January Oil Market report that the downward pressure on oil was due to a small number of large factors. The one that should worry economists and national leaders is that “grim economic news” was at the top of the list.

The other two primary causes were a warm winter across much of the Northern Hemisphere and oversupply.

In the report the IEA experts wrote:

Persistent oversupply, bloated inventories and a slew of negative economic news pressured prices so that by mid-January crude oil touched 12-year lows. The OMR outlook for 2016 has demand growth moderating to 1.2 mb/d.

Global oil supplies expanded by 2.6 mb/d last year, following hefty gains of 2.4 mb/d in 2014. By last December, however, growth had eased to 0.6 mb/d, with lower non-OPEC production that pegged below year-earlier levels for the first time since September 2012.

OPEC crude output eased by 90 000 barrels per day (90 kb/d) in December to a still-lofty 32.28 mb/d, including newly rejoined Indonesia. Iran, now relieved of sanctions, insists it will boost output by an immediate 500 kb/d. Our assessment is that around 300 kb/d of additional crude could be flowing to world markets by the end of the current quarter.

Global inventories rose by a notional 1 billion barrels in 2014-15, with the fundamentals suggesting a further build of 285 mb over the course of this year. Despite significant capacity expansions in 2016, this stock build will put storage infrastructure under pressure and could see floating storage become profitable.

Global refinery runs averaged 79.5 mb/d in the fourth quarter of 2015, down 0.3 mb/d from the estimate in last month’s OMR due to lower-than-expected throughputs in non-OECD Asia except China and a very high maintenance schedule in October. Global refinery margins weakened in December as middle distillate cracks fell and overwhelmed the resilience of gasoline and naphtha.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.