Record oil glut stands at 3 billion barrels

Updated 18 November 2015
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Record oil glut stands at 3 billion barrels

LONDON: The world is awash with oil having built record stockpiles in recent months and slowing demand growth combined with resilient non-OPEC supply could worsen the glut well into next year, the International Energy Agency (IEA) said.
“Stockpiles of oil at a record 3 billion barrels are providing world markets with a degree of comfort,” the IEA said in a monthly report, adding brimming stocks offer an unprecedented buffer against geopolitical shocks or unexpected supply disruptions.
Oil prices have more than halved in the past 18 months with supply bolstered by US shale oil output and OPEC’s refusal to cede market share.
The IEA said global oil supplies breached 97 million barrels per day in October, up 2.0 million from a year earlier, as non-OPEC output recovered from lower levels in the previous month.
And even though lower oil prices will lead to a decline in US tight oil production next year, it will take months to clear the market’s glut, the IEA said.
“This massive cushion has inflated even as the global oil market adjusts to $50 per barrel. Demand growth has risen to a five-year high of nearly 2 million bpd... But gains in demand have been outpaced by vigorous production from OPEC and resilient non-OPEC supply — with Russian output at a post-Soviet record and likely to remain robust in 2016 as well,” the IEA said.
On Thursday, OPEC said in its monthly report that inventories in developed economies were showing their largest excess, relative to the five-year average, in at least 10 years.
A stock overhang that first developed in the United States due to soaring production has now spread across developed nations as well as China and India, the IEA said.
“This surplus crude provides some relief, with OPEC’s spare production buffer stretched thin as Gulf producers pump at near record rates,” the IEA said.

DISTILLATE INVENTORIES
“The shock absorber provided by oil stocks is no longer restricted to just crude. As refineries ran flat out to meet soaring demand for gasoline in top consumers the United States and China, distillate inventories ballooned as a consequence.”
High stocks could protect the market from a supply crunch should there be a lengthy spell of cold temperatures.
“But the current forecast is for a mild winter in Europe and the US If it turns out to be true, bulging stock levels will add further pressure and oil market bears may choose not to hibernate,” the IEA said.

EASING DEMAND GROWTH
Meanwhile, world demand growth is forecast to ease closer to a long-term trend of 1.21 million bpd in 2016 from a very high 1.82 million bpd this year.
“The impact of oil’s steep price plunge on end users is unlikely to be repeated and economic conditions are forecast to remain problematic in countries such as China,” the IEA said.
The IEA said that despite the resilience of producers such as Russia, non-OPEC supply is forecast to contract by more than 600,000 bpd next year.
US light tight oil, the driver of non-OPEC growth, is expected to decline by 600,000 bpd next year, versus previous expectations of contraction by 400,000 bpd.
“Record-high output in Russia provides a partial offset. Russian producers are favoring developments that boost output in the near term, while the rouble’s depreciation and Russia’s oil taxation system are neutralizing the impact of lower prices and spending curbs,” it said.
The IEA raised its forecast for 2016 call on OPEC supply by 200,000 bpd to 31.3 million.
It sees the call on OPEC in the second half of 2016 rising by 1.4 million bpd from the first half to 32 million bpd, which is higher than the group’s current production.
A market share battle between Russia and OPEC producers in Europe is intensifying. Iraq has overtaken Saudi Arabia as the second-largest seller and Iran has already lined up buyers for its oil for when sanctions are lifted.
The IEA cited market sources on Friday as saying Tehran would be able to sell at least an extra 400,000 bpd to buyers in Asia and Europe once sanctions are lifted, including to refiners in Italy, Greece and Spain who prefer to use Iranian crude as their baseload feedstock.
“For this reason, producers are likely to grow still more competitive on pricing,” the IEA said.
“Sour crude markets appear especially oversupplied with discounts versus sweet grades widening. Europe is awash with competing sour crudes from the FSU (former Soviet Union) and Middle East and US sour crudes remained depressed by refinery maintenance,” the IEA said.


Selling sketches and clothes, Libyan women set up businesses against the odds

Updated 3 min 29 sec ago
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Selling sketches and clothes, Libyan women set up businesses against the odds

  • Libya has only a tiny private sector and the economy is dominated by the state
  • Cumulative inflation over the last four years has seen real incomes lose more than half of their purchasing power

TRIPOLI: When inflation began eating into her state-paid salary Libyan architect and assistant professor Seham Saleh started selling drawings over the Internet to help pay the bills.
She joins a growing number of Libyan women launching start-ups in the conservative Arab country, where many still think a woman’s place is in the home but where the strains on personal and family income following years’ of political chaos have forced women to look for more work.
Libya has only a tiny private sector, which means there is a market for locally-produced goods. The economy is dominated by the state, which employs most adults under a structure set up by Muammar Qaddafi, who was toppled in 2011.
Men are the traditional breadwinners, although around 30 percent of women were in the labor force as of 2015, according to a UN report.
“I cannot live on my assistant professor salary of 1,000 dinars ($256) even if it is paid out,” said Saleh. She has been selling drawings of people in Libyan dress or book marks she created on a computer.
“Thank God... people wanted to buy the products,” she said. She also does freelance work as an architect.
Once one of the richest countries in the region, the chaos and civil war that ensued after the fall of Qaddafi has seen Libya’s living standards erode. Little is now produced in Libya other than oil, even milk is imported from Europe.
Cumulative inflation over the last four years has seen real incomes lose more than half of their purchasing power, and the government effectively devalued the dinar last September.
A cash crisis means public servants often do not get their salaries paid out in full. Lenders have no cash deposits as the rich prefer to hold their cash themselves, rather than deposit it in a bank.
Women rarely had jobs outside of sectors such as teaching, although the need for more family income has changed the situation, said Jasmin Khoja, head of a women’s business support venture.
Her organization, the Jusoor center for studies and development, has trained some 33 would-be female entrepreneurs, offers legal advice and office space as women often can’t afford their own.
While Seham’s “Naksha” art business is in its early stages, others such as Najwa Shoukri’s start-up are growing fast. She started designing clothes from home in 2016, and selling them online.
Now, together with five other women, she has a workshop selling 50 pieces a month and plans to open a shop next year on Jaraba Street, the main fashion shopping avenue in Tripoli.
To make the shop a success her output would have to rise to 150 pieces a month. Her brother and family have contributed to investments worth 10,000 dinars.
The biggest challenges for start-ups are legal hurdles and the lack of electronic payment systems.
Some Libyan commercial laws go back to the 1960s and are aimed at big corporations such as oil firms, not start-ups. Under these regulations firms need to deposit thousands of dinars.
“Banks do not give loans, which stops projects and makes them unable to grow or employ other women and young people,” Khoja said.
Undeterred, Mayaz Elahshmi started a business last week training women to fix computers and smartphones.
“There is big demand as many women are reluctant to go to a phone shop where men work, as they have personal files on their phones.”
Six people came to her first training session, each paying 30 dinars.