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. The oil price has recovered steadily since OPEC said last month that it would reduce production, with details to be hammered out at the cartel’s November meeting, and such a deal would “speed up the process” of working off global oil inventories, the IEA said in its monthly report.
“Even with tentative signs that bulging inventories are starting to decline, our supply-demand outlook suggests that the market - if left to its own devices - may remain in oversupply through the first half of next year,” the IEA said. “If OPEC sticks to its new target, the market’s rebalancing could come faster,” it said.
Initially greeted with scepticism among analysts, OPEC’s agreement to cut output has gained traction in the oil market, with the IEA noting that the oil price has risen by 15 per cent since the cartel’s announcement on September 28. Oil prices rose to their highest level in several months after Russian President Vladimir Putin said Monday that his country, not a member of the cartel, was ready to align with OPEC’s push to limit oil output.
In morning European trade Tuesday, both WTI and Brent held well above the key $ 50 level per barrel, at $ 51.31 and $ 53.04, respectively. “The waiting game is over,” the IEA said. “OPEC has effectively abandoned its free market policy set in train nearly two years ago.”