IEA: Global Oil Demand Slowing At Faster Pace Than Predicted

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Global oil demand growth is slowing at a faster pace than initially predicted, the newly released Oil Market Report from the International Energy Agency (IEA) tells subscribers. For 2016, a gain of 1.3 MMbbld is now expected, a downgrade of 0.1 MMbbld from the agency’s previous forecast due to a more pronounced third-quarter slowdown. Momentum eases further to 1.2 MMbbld in 2017 as underlying macroeconomic conditions remain uncertain.

Meanwhile, world oil supplies fell by 0.3 MMbbld in August, dragged lower by non-OPEC producers. At 96.9 MMbbld, global oil output was 0.3 MMbbld below a year ago but near-record OPEC supply just about offset steep non-OPEC declines. Non-OPEC supply is expected to return to growth in 2017 following an anticipated 840,000-bbld decline
this year.

OPEC crude production edged up to 33.47 MMbbld in August, testing record rates as Middle East producers opened the taps. Kuwait and the United Arab Emirates hit their highest output ever and Iraq lifted supplies. Output from Saudi Arabia held near a record, while Iran reached a post-sanctions high. Overall OPEC supply stood 930,000 bbld above a year ago. Further, the anemic outlook for refining throughput extends further amid downward revisions to IEA’s latest forecast. Refinery runs in 2016 are set to grow at the lowest rate in a decade.

IEA reports Organization for Economic Cooperation and Development (OECD) oil inventories built by 32.5 MMbbl in July. As refinery activities reached a summer peak, crude inventories refused to decline until an exceptional storm-related draw hit the U.S. in late August. Oil prices rallied in early August, rising from four-month lows near $42/bbl to briefly rise above $50/bbl amid peak summer demand, which is expected to lead to the first quarterly
crude oil stock draw in more than two years. At the time of IEA’s report, Brent futures had retreated to about $48.45/bbl, while West Texas Intermediate was at $46.35/bbl.

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