The International Energy Agency lowered its forecast for the rise in global oil demand next year on the heels of a lower economic outlook. Now they warn of a “massive” amount of oil in storage that is keeping the crude oil prices down.
Every month, the Paris-based IEA closely monitors this oil market report and they are now saying that global oil demand should grow by 1.2 million barrels per day in 2017. This is lower than last month’s forecast by 100,000 barrels a day and down 200,000 barrels a day from this time last year.
In this report, the agency says, “We expect more subdued growth in refining activity, with runs lagging total oil demand growth for all but the first quarter this year—hardly good news for the crude oil market in the short term.”
But even with price drops, balances in the market are now showing that there really is no oversupply between now and the end of the year. Still, the agency attests that global oil supplies increased by 800,000 barrels a day in July thanks to increased output from Organization of the Petroleum Exporting Countries group members as well as producers from outside this group.
Even with this slow in swelling, the fight for the lion’s share of the market among the world’s biggest oil producing countries continues to press on, pushing OPEC member output, of course, to push output. Analysts do say that the higher Saudi output is, in fact, still locked in a somewhat brutal struggle for this market, against the likes of Russia, Iraq, and now the United States. This resulted, fortunately for them, to close at an all-time in July; and that might suggest the group is not all that serious about even considering a cutback on production. And with increasing OPEC production—in combination with the most recent US data—it remains obvious that the global oil market remains oversupplied.
The report continues, “but there is no gain without some pain. The resulting product stock draw will increase refiner’s appetite for crude oil and help pave the way to a sustained tightening of the crude oil balance.”
As such, crude prices continue to extend their falls on Thursday after the IEA, indeed, trimmed its oil demand forecast on next year’s oil demand. On London’s ICE Futures exchange, Brent crude—which is the global oil benchmark—fell 1.2 percent to reach $43.55 a barrel. West Texas Intermediate Futures exchange futures similarly fell 1.3 percent to $41.14 per barrel on the New York Mercantile Exchange.