Crude demand to grow at slower pace in '17: IEA

Andrew Cummings
August 13, 2016

European benchmark Brent North Sea crude for October rose 65 cents to $46.69 per barrel.

OPEC upgraded on Wednesday its 2016 projections for world oil demand growth to 1.22 million barrels a day (mb/d), up by 30,000 b/d from its previous estimate, but warned that there were "lingering concerns" that refiners in the USA and Europe may cut processing rates, which could decrease the demand for crude.

It is quite hard to state categorically what will happen to global oil markets before the end of this year, but indicators reveal OPEC members wield a strong influence on crude oil production and its ancillary price indexes.

Oil prices surged more than 4% on Thursday after Saudi Arabia's energy ministry said that OPEC and non-OPEC producers would discuss strategies to stabilize the market during an informal meeting next month in Algeria.

However, China's demand has also suffered a severe downfall. Now they warn of a "massive" amount of oil in storage that is keeping the crude oil prices down. The vast global inventory by most accounts will take until 2020 to be extinguished.

Since crude oil refiners could only respond to the problem of reduced oil demands by cutting output, industry experts predict that the trend will be reversed with the approach of winter in the Northern Hemisphere as the year comes to an end.

Iran produced 3.617 million bpd of oil in June, the report said. "The 2016 outlook is unchanged from last month's report", IEA informed. The IEA forecasts Non-OPEC production to further decrease this year by 0.9 million bpd. The Paris-based IEA predicted that global production will fall behind demand by almost one million barrels per day in the July-September period.

Oil futures remained on course for the biggest weekly rise since April on Saudi Arabia's reiteration that talks between OPEC and other oil producers could trigger action aimed at reducing the crude supply glut.

"Volatility levels on the oil market are now extreme", said Commerzbank analyst Carsten Fritsch. Growth in demand will shrink brimming crude stockpiles even as Saudi Arabia, Kuwait and the United Arab Emirates pump at all-time highs amid competition between members of the Organization of Petroleum Exporting Countries to secure market share, the International Energy Agency said. The comments by the minister of the world's top oil exporter triggered fund buying and some short covering, giving a boost to prices, traders and brokers said.

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