Oil stockpiles have swollen to a record of almost 3 billion barrels because of strong production in OPEC and elsewhere, potentially deepening the rout in prices, according to the International Energy Agency.

This “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia, even as world fuel demand grows at the fastest pace in five years, the agency said. Still, the IEA predicts that supplies outside the Organization of Petroleum Exporting Countries will decline next year by the most since 1992 as low crude prices take their toll on the U.S. shale oil industry.

“Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions,” the Paris-based agency said in its monthly market report. With supplies of winter fuels also plentiful, “oil-market bears may choose not to hibernate.”

Crude has dropped about 40 percent in the past year as OPEC defends its market share against rivals such as the U.S. shale industry, which is faltering only gradually despite the price collapse. Oil inventories are growing because supply growth still outpaces demand, the 12-member exporters group said in its monthly report Thursday.

David Fuller's view

We can conclude several things from this informed report of what is currently happening in terms of global supply and demand for crude oil.  

1) Most producers of crude oil around the world are pumping all they can in an effort to offset the revenue losses from lower prices.  This production currently includes 31.76 million barrels a day from OPEC alone. 

2) Now that sanctions on Iran have been removed, their renewed production will increase next year, potentially significantly. 

3) Oil stockpiles have risen every quarter since 1Q 2014 and now total a record 3 billion barrels (see graph in the article above).  This is a significant cushion against any supply disruptions, due to cutbacks, accidents, sabotage or wars in OPEC or other producer regions.  

4) Global oil demand, helped by cheap prices, will climb by 1.8 million barrels a day this year.  This is the fastest pace in five years and is currently at 94.6 million barrels a day.  

These figures show how difficult it will be to lower oil production and consumption significantly anytime soon, without creating economic chaos.  We may not hear this during the EU’s climate talks in Paris during early December, which US President Obama will be attending, but it is clearly a fact.  

What we do know is that even though the EU has been at the forefront of efforts to reduce significantly carbon emissions with the help of nuclear and renewable forms of energy, the unpredictably of wind and solar output, and their limited storage capacity to date, requires that they are backed up by fossil fuel plants.  

(See also: Iran Return to Intensify Europe Oil-Price Competition, IEA Says)