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IEA sees annual demand growth at 1.3mn b/d in 2016-17

14 Jun 2016 09:00 (+01:00 GMT)
IEA sees annual demand growth at 1.3mn b/d in 2016-17

London, 14 June (Argus) — Global oil demand will increase by 1.3mn b/d next year, the same rate of growth as in 2016, while non-Opec supply expansion is likely to return next year, according to the IEA's latest monthly Oil Market Report (OMR).

Global demand is likely to average 97.36mn b/d in 2017, up from 96.07mn b/d this year and from 94.74mn b/d in 2015, the IEA said in its first forecasts for 2017. The absolute majority of demand growth will come from developing economies, said the agency, which has revised its 2016 demand growth forecast up by about 100,000 b/d.

The watchdog sees non-Opec output falling by 900,000 b/d in 2016, including a 500,000 b/d drop in US tight oil production. But it expects a 200,000 b/d rise in non-Opec supply in 2017, to 57mn b/d, driven almost entirely by production from Brazil and Canada. US tight oil output will likely fall by a further 190,000 b/d for the whole of 2017, although production is expected to return to growth by the middle of the year. "The rebound will, however, only truly pick up speed beyond the 2017 forecast horizon of this report," the agency said.

The IEA said the oil market looks to be balancing, but warned of an "enormous inventory overhang to clear" following "three consecutive years of stock build at an average rate close to 1mn b/d". This is likely to dampen prospects of a significant increase in oil prices, it said.

The IEA estimates the global surplus of supply over demand at about 800,000 b/d in the first half of 2016, compared with its expectations of 1.5mn b/d made in January. Assuming only "modest" increases in Opec production and "no further surprises, in the second half of 2016 we expect the oil market to be balanced, with a small stock draw in the third quarter offset by a small stock build in the fourth quarter", the IEA said.

"On the planning assumption that Opec oil production grows modestly in 2017, we expect to see global oil stocks build slightly in the first half of 2017 before falling slightly more in the second half," it said. "For [2017] as a whole there will be a very small stock draw of 100,000 b/d."

The forecast call on Opec crude for this year is lifted by about 300,000 b/d compared with the May report, to 32.5mn b/d. The IEA expects call on Opec crude at 33.5mn b/d in 2017.

Global refinery runs are little changed in the second quarter compared with a year earlier, at 78.8mn b/d, "as refiners finally catch up with maintenance postponed from 2015", the IEA said. "The seasonal ramp-up to the third quarter is expected to be the largest on record, surging by about 2.3mn b/d quarter-on-quarter."