IEA Expect Oil Demand Growth to Fall, Crude Price Declines

The International Energy Agency (IEA) has opined in their latest monthly report for August that global demand oil growth will ease this year to next year, down to 1.7 million barrels per day (bdp) from 1.4 million bdp.

The forecast for 2017 is 0.1 million bpd below what was previously forecast by the IEA due to a more pessimistic macroeconomic outlook, whereas predictions remain unchanged for the rest of this year.

Supply of global oil rose by an estimated 0.8 million bpd in July, which can be attributed to production increased in the OPEC and non OPEC area, output was 215 thousand barrels a day lower than a year earlier, as declines from non-OPEC more than offset a 840 thousand barrels a day annual gains in total OPEC liquids.

Additionally, non-OPEC production is forecast to drop by 0.9 million this year, before rebounding by 0.3 million barrels a day in 2017.

The IEA report revealed that OPEC crude oil output was hiked by 150 thousand barrels a day to 33.39 million barrels a day in July, mainly as Saudi Arabia pushed production to their highest ever total, and Iraqi production also increased its presence on the market, robust Middle East production lifted total OPEC crude supply by 680 thousand barrels a day above the total a year ago, and held output at an eight-year high.

Global refinery throughput in the third quarter is also expected to rise by 2.2 million barrels a day, a considerable leap from a weak second quarter to a record 80.6 million barrels a day.

Crude was also moved into products during June, as OECD countries reported excess crude as part of inventories, commercial stocks ballooned to 5.7 million barrels daily.

An OECD inventory overhang continued to shift from crude into products during June, with commercial stocks swelling by 5.7 million barrels to a record 3 093 million barrels.

Crude oil prices eased down to the $45 per barrel mark in August, as the report alluded to, but today WTI crude prices have fallen further down to 41.50 per barrel, as the United States Energy Information Administration confirmed that there had been a build up in crude inventories.

While Brent Crude Oil future did fall to a nadir of $43.5 this morning once the supply glut news rolled in, it has now jumped back up to $43.9 GMT.

Meanwhile the World Gold Council’s (WGC) latest figures have revealed that the demand for gold reached 2,335 tonnes in the first half of the year, due to increased exchange trade flows during the first six months, rising to 579t tonnes, this was counterbalanced by anaemic jewellery demand in an environment of sharply rising prices.
The WGC said that the gold prices have posted their strongest half year performance in 2016 , an appreciation of 25%, the highest for more than 35 years, investment demand also increased by 16% in the first six months of this year, at 1,063.9 tonnes, eclipsing the previous first half of year high of 2009.

Supply year on year in the second quarter rose by 10%, while the first half of this year compared to last year the rise was a more moderate 1%, which was the slowest rate of growth during the first half of the year for eight years, lending a further boost to gold prices.