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Both the IEA and EIA cut 2016 OPEC call

Published Wednesday, February 10th, 2016

It is rare for the IEA to be as forward as they are in their latest monthly oil report released yesterday. They attribute, uncontroversially, the recent oil price rally to four drivers:- that there will be a production cutback agreement, that OPEC production led by Iran will be less than feared, that global demand will be better than forecast and that the dollar will continue to weaken. They believe that all four drivers are misguided and that in a “market already awash with oil, it is very hard to see how prices can rise significantly in the short term”.

Here are a few of the IEA conclusions:-

— a deal between OPEC and leading non-OPEC producers is no more than “speculation”. “The likelihood of co-ordinated cuts is very low”.

— global oil demand growth will ease back considerably in 2016 to 1.2 mbpd from 1.6 mbpd in 2015.

— the positive sentiment towards oil prices has been helped by dollar weakness. This will not continue because the dollar will rebound as a result of its safe haven status.

— “the surplus of supply over demand in the early part of 2016 is even greater than we said last month”.

— OECD commercial stocks built counter seasonally in December. Forward demand cover is at 65 days.

to read the rest of the report, please click here

Posted by David Hufton