IEA cuts 2015 oil demand outlook

Pipes are pictured at the El Sharara oilfield in Libya. The International Energy Agency says oil prices will likely come under further downward pressure next year.

Reuters/London

Oil prices will likely come under further downward pressure, the International Energy Agency said on Friday as it cut its outlook for demand growth in 2015 and predicted that healthy non-Opec supply gains were poised to aggravate a global oil glut.

The agency, which co-ordinates energy policies of industrialised countries, cut its outlook for global oil demand growth for 2015 by 230,000 barrels per day (bpd) to 0.9mn bpd on expectations for lower fuel consumption in Russia and other oil-exporting countries.

The IEA said it was too early to expect low oil prices to start seriously curtailing North American supply boom.

"Barring a disorderly production response, it may well take some time for supply and demand to respond to the price rout," the IEA said in its monthly report.

Oil prices have been in steep decline since June due to slow demand growth and a North American shale oil boom.

The selloff gained pace after Opec decided last month to keep its output target unchanged to fight for market share with rival producers.

Global crude oil benchmark Brent was trading on Friday at a five-year low around $63 per barrel, down more than 40% from June.

Surging US light tight oil supply will push total non-Opec production to record growth of 1.9mn bpd this year although the pace of growth is expected to slow to 1.3mn in 2015, the IEA said.

Given lower estimates of global demand growth, the IEA said it had revised its predictions for demand for oil from Opec for 2015 down by 300,000 bpd to 28.9mn bpd. That is more than 1mn bpd below the cartel's current production.

Demand for Opec oil will seasonally bottom in the first quarter of 2015, leading to a large build up in stocks.

The IEA said that based on current projections of still relatively weak demand growth and robust supply, global oil inventories would build by close to 300mn barrels in the first half of 2015 in the absence of disruption, shut-ins or cut in Opec production.

"If half of this took place in the OECD, stocks there would approach 2,900mn barrel and possibly bump against storage capacity limits," the IEA said.