(Toronto Star) The much-anticipated rebalancing of oil markets appears to be a bit further away after the International Energy Agency revised its forecast, trimming its expectations for the growth in oil demand and citing near-record production by OPEC’s Middle East exporters.
The IEA said Tuesday that global oil demand is rising at a slower pace than expected, lowering its forecast by 100,000 barrels a day to an increase of 1.3 million barrels a day in 2016 and 1.2 million barrels a day in 2017.
“Recent pillars of demand growth — China and India — are wobbling,” the energy agency said, adding that increases in Europe had “vanished” and that U.S. “momentum” toward higher consumption had slowed.
On the supply side, rising output by members of the Organization of the Petroleum Exporting Countries has more than made up for falling output among non-OPEC countries, especially the United States, formerly the engine of non-OPEC supply increases.
OPEC’s low-cost producers Saudi Arabia, Kuwait, Iraq and Iran — where production costs are often lower than $10 (U.S.) a barrel — cranked up output, with Saudi Arabia and Iran each producing 1 million barrels a day more than they did in late 2014. The increase by Iran, which has been recovering from years of economic sanctions following the international agreement limiting its nuclear program, has been swifter than the IEA expected.
“When will the world oil market return to balance? That is the big question today,” the agency wrote in its closely watched monthly oil market report. “With the price of oil at current levels, one would expect supply to contract and demand to grow strongly. However, the opposite now seems to be happening. Demand growth is slowing and supply is rising.”