IEA released its monthly report this morning, verifying what we already suspected. The global supply glut is expected to continue at least until the end of 2016 due to a slowdown in demand and increased output. IEA maintained its forecast for 2016 at 1.2 million bpd, which is down 600,000 bpd from 2015. The impact of this expected decrease in demand is magnified by the increase in production by OPEC. OPEC’s output last month rose by 50,000 bpd. China’s oil reserves doubled during the first half of 2015, causing a decrease in its demand for imports. Stockpiles are currently at 190.5 million barrels and are expected to increase further, eventually reaching 550 million barrels by 2020.
The supply/demand ratio is pointing to a continued bear market. All of the NYMEX contracts, with the exception of RBOB, are currently oversold which may allow for some short term bounces before the downward trend continues. How low prices could fall is unknown, but the $20 per barrel that Goldman Sachs predicted some months ago isn’t looking as far off as we once may have thought.