The International Energy Agency warned Thursday that oil markets will remain awash with surplus volume for all of 2017 unless OPEC comes through with a promised production cut at the end of November.
Increased pumping by non-OPEC countries including Russia, Brazil, Canada and Kazakhstan will likely boost volumes by 500 million barrels a day next year extending the current oil glut through to the end of next year unless OPEC producers reduce supply, the Paris-based agency said.
OPEC members, led by Saudi Arabia, agreed in principal in September to reduce output to between 32.5 million and 33 million barrels of oil per day when they convene in Vienna on November 30. Hopes that deal will be ratified have faded in recent weeks as OPEC members including Iran, Iraq and Nigeria have said they should be exempted, while OPEC's output has continued to grow, hitting an estimated 33.8 million barrels per day in October.
"If the OPEC countries do implement their ... resolution the resultant production cut will see the market move from surplus to deficit very quickly in 2017, albeit with a considerable stock overhang that will take time to deplete," said the IEA. "If no agreement is reached and some individual members continue to expand their production then the market will remain in surplus throughout the year, with little prospect of oil prices rising significantly higher."
West Texas Crude, the U.S.'s oil standard, traded Thursday at $45.22, down 11% over the past month as faith that OPEC can deliver its cut has waned. Brent crude, the international standard, traded at $46.68, down 12% over the month.