(EnergyAsia, August 31 2015, Monday) — The world will still face an oil supply glut even after adding nearly three million b/d to total consumption between last year and 2016, said the International Energy Agency (IEA).
In its August report, the Paris-based agency said global oil demand will rise by 1.6 million b/d or 1.73% to 94.23 milion b/d this year, and by another 1.37 million b/d or 1.45% to 95.60 million b/d in 2016. The latest figures represent a significant boost from the July demand forecast of 93.97 million b/d for 2015, and 95.18 million b/d, reflecting the overall hastening pace of growth economic growth despite continuing problems in Europe and China.
The agency observed that the oil price collapse over the past year has seen demand react more swiftly than supply.
“As a result, the world is now expected to use 1.6 mb/d more fuel in 2015 than the previous year. That’s the biggest growth spurt in five years and a dramatic uptick on a demand increase of just 700,000 b/d in 2014,” it said.
But the global supply glut will remain the biggest factor influencing the oil markets, likely capping any attempt to break to the upside. Crude prices fell to a six-and-half year low in late August before staging a recovery to enable US WTI to trade above US$45 a barrel and Brent to reclaim support above US$50.
“While a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016 — suggesting global inventories will pile up further,” said the IEA which advises 29 consumer countris.
Global supply will not ease up with OPEC crude production holding steady near a three-year high while producers outside the cartel will continue to boost supply, albeit at a much slower rate this year. Non-OPEC supply has begun to ease off in recent weeks, but will only show a year-on-year decline in 2016.
“As lower prices and spending cuts take a toll, non-OPEC supply growth is expected to slow sharply from a 2014 record of 2.4 million b/d to 1.1 million b/d this year and then contract by 200,000 b/d in 2016,” said the IEA.
Iran could spoil all hopes of a price recovery if the UN lifts trade sanctions sufficiently to enable the Islamic regime to release crude from its bulging stockpiles.
The signs are ominous as Iran released 50,000 b/d in July as soon as the UN indicated it was ready to ease sanctions and prepare for Tehran to return to the world markets.
Any additional Iranian supply will add to record-high inventories among the industrialised countries which rose 9.9 million barrels to hit another all-time high of 2,916 million barrels in June., said the IEA.
OPEC crude supply edged down 15,000 b/d lower in July to 31.79 million b/d as weaker Saudi output offset record high Iraqi production and increased Iranian flows. The IEA expects the demand for OPEC crude to rise by 1.4 million b/d to 30.8 million b/d in 2016.