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(Reuters) A global oil supply glut will persist through 2016 as demand growth slows from a five-year high and key OPEC members maintain near-record output, the International Energy Agency said, even as low prices curb supply outside the producer group.
The IEA, which advises industrialized countries on energy policy, said in a monthly report on Tuesday that world oil demand will rise by 1.21 million barrels per day (bpd) in 2016, down 150,000 bpd from last month’s forecast.
“A projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrels – should international sanctions be eased – are likely to keep the market oversupplied through 2016,” the Paris-based IEA said.
The cut in the demand outlook, due in part to a weaker world economy, makes the IEA’s 2016 growth estimate lower than the two other closely watched government forecasters, the U.S. Energy Information Administration and OPEC. [OPEC/M]
Oil prices, which rose earlier on Tuesday, turned negative after the release of the IEA report.
A drop in prices because of abundant supply to around $50 a barrel – half the level of June 2014 – has led to a downgrade in supply forecasts from countries outside OPEC such as the United States.
Next year, non-OPEC output is expected to contract by nearly 500,000 bpd, the IEA said, as drilling activity slows in the United States and companies elsewhere delay projects.
“Non-OPEC supply growth is disappearing fast,” it said. “The sharpest slowdown is in the U.S., where onshore crude and condensate production has started to drop.”
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