AN authority on the global oil and gas industry has cuts its forecasts for demand growth in a move that could heighten fears the crude price slump could run deeper and last longer than thought.
The International Energy Agency said it expects growth in demand for oil to ease from 1.4 million barrels per day this year to 1.2mbd in 2017 reflecting a notable slowdown in expansion in the world’s leading economies.
The Paris-based agency reduced its forecast for 2017 by 100,000 barrels per day citing a dimmer economic outlook following the UK’s vote to leave the European Union.
It noted the International Monetary Fund had reduced its projection for global economic growth by 0.1 percentage points, to 3.4 per cent, following the Brexit vote.
Any slowdown in growth in demand is likely to put pressure on crude prices, which have lost ground in recent weeks as hopes that major producers would curb output have faded while demand has stuttered.
Brent crude traded at around $45 per barrel yesterday, compared with $52/bbl in June and $115/bbl in June 2014.
The IEA noted: “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.”
The growth in production comes at a time when a massive overhang of stocks is keeping a lid on prices. Supply and demand movements could weigh further on prices later this year.
The agency expects refineries to reduce activity during the fourth quarter maintenance season while production will increase further.
“Oil prices could now be pricing in the fundamentals of at least the first part of a relatively looser 4Q16 crude market,” it noted.
The prediction that there should eventually be a sustained tightening of the crude oil balance as refiners start to use up their stocks of raw materials may bring little comfort to producers in the North Sea who are enduring the third year of a deep downturn.
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