IEA expects global oil demand growth to wind down in 2016

Crude oil prices eased to around $45 per barrel in August as a global supply overhang weighed and demand growth weakened, the International Energy Agency (IEA) said in its newly released IEA Oil Market Report (OMR) for August. 

Brent crude had threatened to break below $40 per barrel at the end of July, IEA said.

According to the agency, global oil demand growth is expected to slow from 1.4 mb/d in 2016 to 1.2 mb/d in 2017, as underlying support from low oil prices wanes. The 2017 forecast – though still above-trend – is 0.1 mb/d below IEA’s previous expectations due to a dimmer macroeconomic outlook. The 2016 outlook is unchanged from last month’s report.

Meanwhile, global oil supply rose by about 0.8 mb/d in July, as both OPEC and non-OPEC production increased. Output was 215 kb/d lower than a year earlier, as declines from non-OPEC more than offset an 840 kb/d annual gain in total OPEC liquids. Non-OPEC production is forecast to drop by 0.9 mb/d this year before rebounding by 0.3 mb/d in 2017.

OPEC crude oil output rose by 150 kb/d to 33.39 mb/d in July as Saudi Arabia pushed output to the highest ever and Iraq pumped more. Robust Middle East production lifted total OPEC crude supply 680 kb/d above a year ago and held output at an eight-year high.

Global refinery throughput in the third quarter is expected to rise by 2.2 mb/d from a weak second quarter to a record 80.6 mb/d. At only 0.6 mb/d above a year earlier, third quarter runs will lag expected demand growth, eroding some of the product stock cushion built up since mid-2015. Runs are forecast to decline seasonally to below 80 mb/d in the fourth quarter of 2016.

An OECD inventory overhang continued to shift from crude into products during June, with commercial stocks swelling by 5.7 mb to a record 3 093 mb. Declines in crude oil holdings were offset by an above average product build of 15.9 mb, with big volumes of US propane and other NGLs moving into storage.

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