IEA cuts 2017 forecast for oil demand in monthly report

Oil demand is expected to slow next year as the global economic outlook has weakened, according to the International Energy Agency on Thursday.

In its IEA Oil Market report for August, the Paris-based organisation cut its forecast for 2017 global oil demand by 100,000 barrels per day (bpd) to 1.2m bpd, down from 1.4m bpd this year.

The IEA said global oil supply rose by about 800,000 bpd in July as both production from members and non-members of the Organization of the Petroleum Exporting Countries (OPEC) increased.

However, overall production fell 215,000 bpd from a year earlier, as a decline in output from non-OPEC members offset an 840,000 bpd annual gain in total OPEC liquids.

Outages caused by disruptions in Nigeria and wildfires in Canada pulled production lower among non-OPEC members. The increase in OPEC output was driven by Saudi Arabia and Iraq.

Overall weak demand coupled with a continued oversupplied market saw crude prices ease to about $45 per barrel in August.

“Today’s IEA report paints a more downbeat picture for oil demand heading into year-end than it did in its July update,” said Michael Hewson, chief market analyst at CMC Markets UK.

“…the downgrade to demand by the IEA has raised concerns that lower oil prices could well be with us for a little while longer, great news for consumers, not so much for oil exporters, and oil company share prices that have rallied on the basis that oil prices are on their way back up again.”

The report comes a day after the US Energy Information Administration said weekly US crude inventories rose 1.1m barrels last week to 523.6m barrels, compared to expectations for a 1.75m-barrel fall.

Separately, the EIA raised its outlook for US crude production this year and next. It now expects output to average 8.73m barrels a day this year and 8.31m barrels a day next year, up from its previous forecast of 8.61m per day and 8.2m a day, respectively.

At 1548 BST, West Texas Intermediate crude rose 2.1% to $42.63 per barrel and Brent edged up 2.2% to $45.06 per barrel.