Could there be another looming oil glut in the market?

There has been a series of mixed messages from the IEA and OPEC in recent days, leading to even more uncertainty in the oil market. The first of the messages was the TASS interview with Saudi oil minister Khalid al-Falih, where the minister stated that Saudi Arabia has enough capacity to cover for any shortfall as regards Iran. However, he was quick to point out that any further outages on the part of other oil-producing countries would test the abilities of the cartel.

Libya looks to be playing it part perfectly at the moment and according to Mustafa Sanalla, the head of Libya’s National Oil Corp., the Northern African nations aims to increase production to as high as 1.6 million barrels per day by the end of 2019, the highest level since the civil war began in 2011.

Despite al-Falih’s confidence in the TASS interview, the oil minister sounded a bit more concerned about a possible glut when he spoke to Saudi media, admitting his worries about rising inventories. “We (have) entered the stage of worrying about this increase,” Al-Falih said. It is worth noting that crude stocks are up over 28 million barrels since mid-September.

The International Energy Agency has also expressed concerns about inadequate supply with the head of the agency urging OPEC to increase production in December at a meeting of both bodies. “Global oil markets are going through a very sensitive period – global economic growth as well,” according to the IEA Executive Director Fatih Birol in a Bloomberg interview in London. “If the oil producers care about the health of the growth of the global economy, which I believe they do, they should take the steps to further comfort the market.”

The IEA Executive Director was quick to mention that the global economy could enter a “red zone” if oil supply is not increased, stating that “the next few months might be difficult if the producers don’t increase production or give the signal for it.”

The market seems to be confused at the moment as supply outages and limited spare capacity threaten to send the prices up, consequently endangering the global economy. On the other hand, the market seems to have an adequate supply at the moment, and rising inventories coupled with a decline in decline could lead to the return of supply surplus.

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