A global oil supply glut will persist through 2016 as demand growth slows from a five-year high and key Organization of the Petroleum Exporting Countries (Opec) members maintain near-record output, the International Energy Agency (IEA) said, even as low prices curb supply outside the producer group.
The IEA, which advises industrialised countries on energy policy, said in a monthly report yesterday that world oil demand will rise by 1.2m barrels per day (bpd) in 2016, down 150,000 bpd from last month’s forecast.
“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,” said the IEA said.
The cut in the demand outlook, due in part to a weaker world economy, makes the IEA’s 2016 growth estimate lower than the two other closely watched forecasters, the US Energy Information Administration and Opec.
A drop in prices because of abundant supply to around $50 a barrel, half the level of June 2014, has led to a downgrade in supply forecasts from countries outside OPEC such as the US.
Next year, non-Opec output is expected to contract by nearly 500,000 bpd, the IEA said.
“Non-Opec supply growth is disappearing fast,” it said. “The sharpest slowdown is in the US, where onshore crude and condensate production is dropping.”
While the IEA still sees a contraction in non-Opec supply next year, it expects supply to be about 100,000 bpd higher than in last month’s report. This, plus the weaker global demand projection, prompted the IEA to cut its estimate of the demand for Opec oil to 31.1 million bpd.
Opec is already producing more than that, even before a potential lifting of sanctions on Iran clears the way for Tehran to increase exports in 2016.
Opec raised supply in September by 90,000 bpd to 31.72m bpd, the IEA estimated, saying it expected output to hover around 31.5m bpd in coming months.
In 2014, the group dropped its longstanding policy of supporting prices by cutting output, choosing instead to defend market share against higher-cost producers, and there has been no sign of a change of tack.
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