“Today’s IEA report paints a more downbeat picture for oil demand heading into year-end than it did in its July update”, said Michael Hewson, chief market analyst at CMC Markets UK.
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“Oil’s drop … has put the “glut” back into the headlines even though our balances show essentially no oversupply during the second half of the year”, the Paris-based IEA said in its monthly report.
This would “help pave the way to a sustained tightening of the crude oil balance”.
Average price for Brent oil will be $41.6 per barrel in 2016 and $51.58 per barrel in 2017, according to the U.S. Energy Information Administration’s (EIA) forecasts in the Short-term Energy Outlook August 2016.
The Paris-based organization predicted in its Oil Market Report for August that output is likely to lag demand by nearly one million barrels a day from July to September even as OPEC producers pump at record or near record levels.
On the demand side, the IEA said it expected a slowdown from 1.4 million barrels per day in 2016 to 1.2 million bpd in 2017.
Oil prices continued to fall on Wednesday, driven in part by elevated USA crude inventories and Saudi Arabia’s record oil production.
Seemingly the group of major oil producing nations are again prioritising market share, rather than supporting the unit price of an individual barrel of crude.
Oil prices entered a “bear” market last week, having fallen more than 20 percent from peak levels above Dollars 50 a barrel seen in early June, and closing below USD 40 for the first time since April. An OECD inventory overhang continued to shift from crude into products during June, with commercial stocks swelling by 5.7 million barrels to a record 3 093 million barrels. Additionally, data showing Saudi Arabia pumped oil at record volumes in July added to worries about a global crude oversupply. In 2017, non-OPEC supply is expected to decline by 0.15 mln barrels daily, following a downward revision of 40,000 barrels a day.
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The agency also said that oil markets are balancing and that demand started outpacing production in July by almost 1 million barrels a day.
