The IEA (International Energy Agency) reported that slowing crude oil demand, high global crude oil and product inventories, and rising crude oil production will extend the crude oil oversupply until 1H17.
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Investment in global energy projects fell eight percent a year ago on sliding expenditure in oil and gas upstream projects, despite robust spending in renewables, electricity networks and energy efficiency, the Paris-based IEA said in a report. However, the opposite now seems to be happening.
“Our forecast in this month’s report suggests this supply-demand dynamic may not change significantly in the coming months”.
The 14-nation OPEC oil exporting group will meet informally in Algeria with non-member producers on the sidelines of the International Energy Forum from September 26 to 28. Non-OPEC supply is expected to return to growth in 2017 (+380 kb/d) following an anticipated 840 kb/d decline this year.
The IEA’s Oil Market Report was revised to predict that the world will be demanding another 1.3 million barrels a day this year, down 100,000 barrels a day from its previous forecast “due to a more pronounced” slowdown in the third quarter. “The investment in renewable power capacity in 2015 generates more than enough to cover global electricity demand growth”, the report said.
The more pessimistic demand forecast comes a day after a report from the Organization of the Petroleum Exporting Countries that painted a picture of a world still awash in crude thanks to resilient output from US producers and others. On Wednesday, Eurostat reported that industrial production was down 1.1% in June compared to a 0.8% increase the month before and the pre-report estimate of minus 0.9%.
OPEC s members and Russian Federation are due to convene an informal meeting in Algeria this month but investors hopes that they will agree to limit production have dimmed in recent days.
The increase by Iran, which has been recovering from years of economic sanctions following the global agreement limiting its nuclear program, has been swifter than the IEA expected.
According to the IEA, OPEC crude production edged up to 33.47 mb/d in August – testing record rates as Middle East producers opened the taps. With the price of oil at current levels, one would expect supply to contract and demand to grow strongly.
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Weakening demand India and China coupled with slowing economic momentum in the United States has dampened demand growth, the IEA said. Oil prices have plummeted since mid-2014 as a result of an oil glut and the failure of demand to keep pace. Analysts had expected a build of 3.8 million barrels.
