After stabilizing in recent weeks, global oil prices resumed their fall over concerns that the world is producing more crude than it can store. The International Energy Agency warned Friday that the oil glut continues to build as U.S. oil producers continue cranking the pumps.
Brent crude, a global benchmark, dipped 62 cents to $56.46 Friday morning following the release of the IEA’s monthly energy report. U.S. benchmark crude plunged nearly 3 percent, or 81 cents, to $45.66 in midday trading.
The IEA, based in Paris, said that even as oil output declined in February among OPEC members, the global supply still rose by 1.3 million barrels per day year-on-year, to an estimated 94 million barrels per day in February. The uptick is due to a 1.4 million barrel-per-day rise among non-OPEC nations, led by the United States.
“U.S. supply so far shows precious little sign of slowing down,” even as drilling-rig counts decline and oil-field services companies slash thousands of jobs, the IEA said in its report. “Quite to the contrary, it continues to defy expectations.”
The oil boom is quickly straining crude-storage capacity in the U.S. and abroad. With American crude supplies at their highest level in more than 80 years, nearly 70 percent of the nation’s storage facilities and tankers are already filled up, the IEA said in a report last week. Across all industrialized nations, commercial oil and petroleum product stockpiles are expected to reach an all-time high of 2.83 billion barrels by mid-year.
“There is still a massive oversupply in the first half [of 2015],” Barbara Lambrecht, an analyst at Commerzbank in Frankfurt, Germany, told Reuters Friday. “We still expect oil prices to fall in the coming weeks due to rising inventories.”
What happens in the second half of the year is still a mystery to many analysts. Lambrecht suggested the market will be more balanced in the second half as production cuts finally lower global oil output. But Olivier Jakob, an analyst at Petromatrix, told Reuters that if the U.S. eases sanctions against Iran, allowing the Middle Eastern giant to export more oil, the world’s crude supplies could rise once again.
“A question market for the second half remains Iran, and the answer to that is expected to come in over the next two weeks” as the U.S. and other nations negotiate a deal over Iran’s nuclear work, Jakob told the media outlet.