IEA forecasts slow growth for crude oil demand next year

Global oil demand growth is forecast to slow to 1.2 million barrels per day (mbpd) in 2016, from an average 1.4 mbpd this year, the International Energy Administration (IEA), said in its July Oil Market Report.

According to the report, world oil demand growth appears to have peaked in the first quarter at 1.8 mbpd and will continue to ease throughout the rest of 2015 and into 2016 as temporary support fades. Global oil supply surged by 550 000 barrels per day (550 kbpd) in June, on higher output from both OPEC and non-OPEC producers.

At 96.6 mbpd, world oil production was an impressive 3.1 mbpd higher than a year earlier, with OPEC crude and natural gas liquids accounting for 60 per cent of the gain. Non-OPEC supply growth is expected to grind to a halt in 2016, as lower oil prices and spending cuts take a toll.

It stated: “OPEC crude supply rose by 340 kbpd in June to 31.7 mbpd, a three- year high, led by record high output from Iraq, Saudi Arabia and the United Arab Emirates.

OPEC output stood 1.5 mbpd above the previous year. The “call on OPEC crude and stock change” for 2016 is forecast to rise by 1 mbpd, to 30.3 mbpd. “OECD industry inventories hit a record 2 876 mb in May, up by a steep 38 mb. Product holdings led the build-up and by end-month covered 30.7 days of forward demand.

Global supply and demand balances suggest that the rate of global stock increases quickened rapidly to an astonishing 3.3 mbpd during the second quarter.

“Robust margins spurred stronger-than-expected OECD refinery runs, lifting second-quarter global throughput estimates to 78.7 mb/d. Global refinery throughputs are forecast to increase by a further 0.7 mb/d in the third quarter, with annual gains shifting to the non-OECD. New capacity start-ups in 2015 and 2016 will put margins under pressure.

The IEA noted, however, that two “curveballs” were contained within its demand forecast: Greece’s ongoing financial crisis, to the downside, and Iran – and a potential nuclear deal that could see sanctions on the country lifted — to the upside.

On the back of this volatility, the IEA forecast that global oil demand growth would slow to 1.2 million barrels a day (mbpd) in 2016, from around 1.4 mbpd this year.

“The rebalancing that began when oil markets set off on an initial 60 percent price drop a year ago has yet to run its course,” it said. “Recent developments suggest that the process will extend well into 2016, as shown in our quarterly supply/demand balances for that year.”