Wednesday, February 24, 2016 5:56 pm
Strong demand should start to cut into an oil glut around the end of this year even as new Iranian supplies persist, BP’s chief economist said on Wednesday.
BP’s Spencer Dale said in Brussels he could not predict what OPEC and other major producers would do, although promised freezes had come from nations unlikely to increase output.
“What is clear is the oil market is behaving like any market. Prices are falling quite sharply and as a response, demand is growing quite fast. Last year, global oil demand grew by twice its 10-year average.
“Even allowing for Iranian supply, I see flat to falling global supplies this year and so I think you’ll see a big swing in the market.
“By the end of this year, the market moves closer into balance.
“There will still be a highly significant stock overhang,” he added, which could take a year or more to disappear.
But a stock overhang could still linger for at least a year.
Oil prices dropped to their lowest since 2003 last month under the pressure of a supply surplus of around one million barrels per day (bpd).
Saudi Oil Minister Ali Al-Naimi has ruled out imminent OPEC production cuts, although he said on Tuesday he was confident more nations would join a pact to freeze output.
Fellow OPEC member, Iran, meanwhile, is eager to increase output after sanctions were lifted.
Demand growth, although probably not as strong as last year, would continue, he said.
BP also for the long-term to 2035 predicts rising oil demand as the number of vehicles outside the developed world triples.