IEA: Saudi Strategy is Working as Non-OPEC Oil Output Set for Biggest Fall in 24 Years

2016 will see overall non-OPEC production drop to to 57.7 million barrels per day, predicts IEA.

Non-OPEC oil production next year will fall by nearly half a million barrels per day (bpd), marking the biggest decline in 24 years and a clear sign that Saudi Arabia's strategy to defend its market share at any cost is working, the International Energy Agency (IEA) says in its latest Oil Market Report.

"On the face of it, the Saudi-led OPEC strategy to defend market share regardless of price appears to be having the intended effect of driving out costly, 'inefficient' production," said IEA.

Lower output in the U.S., Russia, and North Sea will see overall non-OPEC production drop to 57.7 million bpd in 2016, IEA predicts, meaning next year's demand for OPEC oil will rise by 1.6 million bpd to 31.3 million bpd.

However IEA ruled out any suggestion this could ease rising stock levels, noting that the amount was still less than the 31.57 million bpd OPEC produced in August.

"But until then, inventories are continuing to build with global supply - towering 2.4 mb/d above a year ago - outpacing demand. Our balances show the world only starting to siphon off record-high stocks in the second half of 2016," said IEA.

"At that point Iran could be producing more oil, provided sanctions are lifted following implementation of the nuclear pact it secured with the P5+1 group."

And that scenario is looking increasingly more likely, with Senate Democrats Thursday blocking Republican efforts to register formal disapproval of the Iran deal, paving the way for it to be implemented.

Earlier this month Ship & Bunker reported that some OPEC countries are struggling with the low crude prices.