Oil market to be oversupplied into 2016, global energy agency says

The International Energy Agency is predicting the world oil market will remain oversupplied for at least another year, in a report that injected fresh volatility into oil markets.

Oil prices and the Canadian dollarplunged at the release of the report Tuesday, and swung throughout the day as traders struggled to find a range.

• Business outlook tepid as commodities price slide weighs on economy
• Canadian GDP outlook slashed to 1.2% with 3 provinces in recession

West Texas Intermediate crude ended the day down 55centsto $46.55US a barrel, after hitting highs above $50 earlyMonday.It was knocked back by five per cent yesterday by fresh output figures that showed OPEC has increased its oil production.

The loonie sank yesterday and wastrading down 0.13 cents to76.81cents US at the close.

The Canadian dollar is sensitive to the price of oil, because our economy is heavily reliant on resource extraction.

The Paris-based IEA, the global agency that keeps tabs on energy supply and demand, is predicting a slowdown in global demand for crude in line with moribund world economic growth.

Non-OPEC output slowing

Global crude demand growth is expected to slow to 1.2 million barrels per day in 2016 from 1.8 million barrels this year. The oversupply of oil has pulled down oil prices from above $90 this time last year to the $45 to $50 range now.

Lower oil prices and steep spending curbs in the North American oil patch are expected to reduce projected non-OPEC output by 500,000 barrels a day next year.

But OPEC output is projected to grow, the IEA said, falling in line with OPEC's own assessment of growing supply. On Monday, OPEC revealed it pumped 31.57 million barrels a day in the past month, the highest level since 2012.

"A projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrels should international sanctions be eased are likely to keep the market oversupplied through 2016," the IEA said in its monthly report.

Dominic Haywood, oil analyst at Energy Aspects, said Saudi Arabia's strategy of keeping production high to maintain market share is having the impact that OPEC desires reducing production in the U.S. and other non-OPEC countries.

In new signs the global economy has slowed,China's imports fell 20 per cent in September, despite government stimulus programs.