The IEA said it was basing its projections on the International Monetary Fund’s decision in July to cut its world economic growth forecast following Britain’s vote to leave the European Union the previous month.
Advertisement
The IEA today said it expects demand to fall to 1.2 million barrels a day next year from 1.4 million barrels a day in 2016. OPEC report has also taken its toll that showed record oil production of 10.67 million barrels by Saudi Arabia.
Although the drop in the oil price by about $7 (6.30 euros) per barrel since its mid-June peak of over $52 “has put the “glut” back into the headlines”, excess supply would likely be soaked up in the months ahead. On the positive side, the EIA also reported a draw of 2.8 million barrels in USA gasoline stocks for the last week. The forecast for 2017 is 0.1 million bpd below what was previously forecast by the IEA due to a more pessimistic macroeconomic outlook, whereas predictions remain unchanged for the rest of this year. American Petroleum Institute’s (API) report showed more than 2 million barrels of increase in oil stocks, while Energy Information Administration (EIA) reported more than a million gains.
Many analysts say they see oil prices trading within a range for the next few weeks.
“The massive overhang of stocks is also keeping a lid on prices, with both newly produced and stored crude competing for market share in an increasingly volatile refinery margin environment”.
Citing the report Reuters wrote that “oil markets will begin to tighten already during the second half of 2016 but process will be slow and painful as global demand growth declines and non-Opec supplies rebound”. USA light crude traded around $41.71 a barrel, unchanged from the previous close, after falling sharply on Wednesday.
Lower oil prices have forced high-cost producers such as the United States to slash spending and reduce drilling, resulting in an expected drop in non-OPEC output of 0.9 million bpd this year.
Moving forward, USA production is likely to increase further, as producers have adjusted their business models and cost structures to keep pumping oil in a low pricing environment.
Advertisement
Global supply of oil rose by 800,000 bpd in July, with output from nations in the Opec oil producers’ cartel rising sharply. 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.
