“The Oil Market Could Drown In Oversupply,” IEA Warns
by Tyler Durden
ZeroHedge.com
01/19/2016
On Monday, we noted with some incredulity that North Dakota Sour – a high-sulfur grade of crude – was briefly going for -$0.50 at the Koch brothers’ Flint Hills Resources refining arm.
That’s not a misprint. If you had yourself some North Dakota Sour, you’d have to pay a refinery to take it off your hands. Your product was worth less than nothing.
We use the past tense there because once Bloomberg broke the story, Flint Hills quickly replaced the negative number with a positive one – you can now get $1.50.
Negative oil prices – even if they merely reflect the increased cost of transporting certain grades – underscore just how acute the downturn has become in the face of a global deflationary supply glut created by the Saudis, perpetuated by ZIRP, and exacerbated by the incipient threat of Iran’s return to market.
Now, with crude having dipped below $30 (today’s rebound notwithstanding) the question on everyone’s mind is simply this: can oil continue to move lower? According to the IEA, the answer is “an emphatic yes.”
In its latest oil market report, the agency warns that the world could “drown in oversupply” with the return of Iranian crude. “If Iran can move quickly to offer its oil under attractive terms, there may be more ‘pricing in’ to come,” the agency’s monthly report says. “While the pace of stock building eases in the second half of the year as supply from non-OPEC producers falls, unless something changes, the oil market could drown in over- supply.”
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