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IEA sees delay in oil market returning to balance

13 Sep 2016 09:00 (+01:00 GMT)
IEA sees delay in oil market returning to balance

London, 13 September (Argus) — The rebalancing of the oil market is likely to take longer than previously anticipated because of slowing demand growth and increasing supply, according to the IEA.

The "supply-demand dynamic may not change significantly in the coming months", the Paris-based watchdog said in its latest Oil Market Report (OMR) today. "Supply will continue to outpace demand at least through the first half of next year. Global inventories will continue to grow."

The IEA revised down its global oil demand growth forecast by about 100,000 b/d to 1.3mn b/d this year. It anticipates growth slowing to a two-year low of 800,000 b/d in the third quarter from 1.4mn b/d in April-June. It expects demand to average 96.1mn b/d this year.

"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 have not helped either," the watchdog said. "Unexpected gains in Europe have vanished, while momentum in the US has slowed dramatically."

The IEA kept its 2017 demand growth forecast unchanged at 1.2mn b/d, saying "underlying macroeconomic conditions remain uncertain". It sees demand averaging 97.3mn b/d next year.

The agency sees non-Opec supply growing by 380,000 b/d next year to 57mn b/d, faster than the 300,000 b/d growth forecast last month. For 2016, the energy watchdog anticipates a fall of 840,000 b/d.

"US tight oil output is expected to bottom out in the third quarter of 2016, with annual growth resuming in the second half of 2017," the IEA said.

Opec said yesterday it expects non-Opec supply to increase by 200,000 b/d to 56.52mn b/d in 2017.

The IEA also highlighted high output within Opec: "Saudi Arabia's vigorous production has allowed it to overtake the US and become the world's largest oil producer. Indeed, Opec's low-cost Middle East producers — Saudi Arabia, Kuwait, the UAE and Iraq — are all at or near all-time highs, while Iran's post-sanctions ramp up has been swift."

The IEA's call on Opec crude stands at 32.5mn b/d this year and 33.2mn b/d in 2017, trimmed by 200,000 b/d for this year and by 300,000 b/d for next when compared with last month's report.

Inventories in developed economies reached a new record of 3.1bn bl in July, the IEA said. "As refinery activities reached a summer peak, crude oil inventories refused to decline until an exceptional storm-related draw hit the US in late August," it said.

The watchdog expects global refinery runs to grow this year by around 340,000 b/d, the lowest rate in a decade excluding the 2008-09 recession.

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