Business

Record oil glut stands at 3bn barrels

Oil barrels Image copyright Getty Images

A record glut of oil is set to continue into next year and maintain pressure on prices, the International Energy Agency said on Friday.

Stockpiles stand at a record three billion, the IEA said in its monthly report.

The report has added to falls on European stock markets, with the FTSE 100 shedding close to 1% on Friday.

Frankfurt and Paris also declined following sharp falls in Asian stock markets, with Hong Kong sliding 2.2%.

Investors also reacted to disappointing eurozone growth figures and a slump in commodity prices on the back of weaker demand from China.

Other factors affecting confidence include fears that the Federal Reserve will raise interest rates next month and poor corporate results from heavyweights including Rolls-Royce and E.On this week.

The FTSE 100 was down 0.98% at close of trading after closing down 1.9% on Thursday, while Frankfurt's Dax fell 0.7% and the Cac in Paris shed 1%.

'Primed for correction'

There were no risers on the French market, with aerospace and defence company Safran topping the fallers with a near 6% slide.

Craig Erlam, senior market analyst at Oanda trading group, said: "The market was primed for some form of correction following a good five weeks for investors."

Growth in the 19-nation eurozone slowed to 0.3% in the third quarter, official figures indicated on Friday, with Germany slowing as France returned to expansion.

"Slower eurozone GDP growth... will intensify already strong belief that the ECB will deliver more stimulus at its December policy meeting," said Howard Archer, chief European economist at IHS Global Insight.

Image copyright Getty Images
Image caption Iraq is one nation that has increased oil production this year

Oil prices have more than halved in the past 18 months as US shale oil output and a refusal by nations in the OPEC cartel to cut production added to oversupply.

On Friday, Brent crude was down 36 cents, or nearly 1%, at $43.68 a barrel, and US crude was down $1.20, or 2.8%, at $40.55.

Although lower oil prices will lead to a decline in US production next year, the IEA said it would take months to clear the glut.

"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 two million barrels per day," the agency said. "Gains in demand have been outpaced by vigorous production from OPEC and resilient non-OPEC supply."

Growth in global demand for oil is expected to fall in 2016 as the allure of lower prices fades, the IEA added.

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