Global oil demand growth will slow to 1.2 MMbpd in 2016, down from a five-year peak of 1.8 million reached this year, as the boost from cheap fuel prices wears off, the agency said.
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Futures of Brent and USA crude’s West Texas Intermediate struck February 2009 lows for a fourth day in a row in continued fallout from an OPEC meeting last week that abandoned price support measures.
In its monthly Oil Market Report, the Paris-based IEA, the key energy advisor to the OECD, found a nine-month long rally of strong demand growth for oil in the U.S. came to an abrupt halt in September.
Opec warned that its “oil demand forecast for 2016 is subject to considerable uncertainties, depending on the pace of economic growth, development of oil prices, and weather conditions, as well as the impact of substitution and energy policy changes”.
“Storage levels may provide yet another check on reality”, the IEA said.
“There is evidence the Saudi-led strategy is starting to work”, the IEA said, referring to the producer group’s decision to maintain high output to safeguard market share.
Things look like getting much worse before they get better for oil producers, with the first signs of rapidly declining demand for oil emerging at a time of “unrelenting oversupply”.
Production from OPEC’s 12 members rose by 50,000 bopd to 31.73 MMbopd in November, the highest in two months, the agency said.
North Brent Sea crude for January delivery wavered between $37.37 and $39.74 a barrel, before closing at $37.90, down 1.83 or 4.62% on the day.
It is not possible nor practical for oil prices to fall below 40 a barrel.
ANZ bank said on Friday that “crude oil markets will remain subdued in 2016, though prospects for a recovery look better in the second half of the year”. Everybody is predicting that oil prices will decline to as low as 30 or even 25, but this is pure speculation just to gain more publicity or to be known as the one who forecasted low level of crude oil prices.
OPEC, which produces about 40 percent of global oil supplies, is seeking to drive out higher-cost producers from the market. Rapidly expanding gasoline demand, in contrast to weak gasoil/fuel oil, adds to “the increasingly compelling argument that the Chinese economy is undergoing a structural transformation – shifting from heavy manufacturing/exports towards a more domestically-focused economy”, it added.
“U.S. tight oil production, the main driver of non-OPEC supply growth, has been declining since April”, OPEC said in the report.
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