IEA has painted a gloomy picture of oil demand in its latest monthly market outlook, with economic woes to blame across much of the globe.
World oil supply will continue to outpace demand at least through the first half of next year, IEA said Tuesday after downgrading its full year demand growth forecast.
Global oil demand is growing slower than expected, triggering a 100,000b/d downgrade to IEA’s 2016 forecast to bring it to 1.3mn b/d YoY. As a result global inventories will continue to grow after OECD stockpiles smashed through the 3.1bn bl wall in July this year. Fourth quarter demand is tipped at 97.03mn b/d, up 1.5mn b/d YoY, after supply outpaced first half demand to the tune of 1.56mn b/d.
August output declined 300,000b/d YoY to 96.9mn b/d. Full year global output is still rising albeit at a slower rate than in 2015, with OPEC output making up for lost market share from higher priced US shale producers. Output from OPEC’s low cost middle east producers Saudi Arabia, Kuwait, UAE and Iraq is all at or near all time highs, while Iran’s post-sanctions ramp up has been swift, IEA said.
“Recent pillars of demand growth China and India are wobbling. After more than a year with oil hovering around $50/bl, the stimulus from cheaper fuel is fading. Economic worries in developing countries haven’t helped either. Unexpected gains in Europe have vanished, while momentum in the US has slowed dramatically,” IEA said.
Even though weak oil prices would be expected to shrink supply and expand demand, the opposite currently seems to be occurring, IEA said.
“Consequently, stocks of oil in OECD countries are swelling to levels never seen before,” it said.
MS – 14/09/2016