Oil Prices Could Fall Further Before Production Growth Slows - IEA (OIL) (USO)

Global oil demand growth is forecast to slow to 1.2 million barrels per day (mb/d) in 2016, from an average 1.4 mb/d this year, the IEA Oil Market Report for July informed subscribers, though strong consumption is expected in non-OECD Asia.

World oil demand growth appears to have peaked in the first quarter at 1.8 mb/d and will continue to ease throughout the rest of 2015 and into 2016 as temporary support fades.

Global oil supply surged by 550 000 barrels per day (550 kb/d) in June, on higher output from both OPEC and non-OPEC producers. At 96.6 mb/d, world oil production was an impressive 3.1 mb/d higher than a year earlier, with OPEC crude and natural gas liquids accounting for 60% of the gain. Non-OPEC supply growth is expected to grind to a halt in 2016, as lower oil prices and spending cuts take a toll.

OPEC crude supply rose by 340 kb/d in June to 31.7 mb/d, a three- year high, led by record high output from Iraq, Saudi Arabia and the United Arab Emirates. OPEC output stood 1.5 mb/d above the previous year. The "call on OPEC crude and stock change" for 2016 is forecast to rise by 1 mb/d, to 30.3 mb/d.

OECD industry inventories hit a record 2 876 mb in May, up by a steep 38 mb. Product holdings led the build-up and by end-month covered 30.7 days of forward demand. Global supply and demand balances suggest that the rate of global stock increases quickened rapidly to an astonishing 3.3 mb/d during the second quarter.

Robust margins spurred stronger-than-expected OECD refinery runs, lifting second-quarter global throughput estimates to 78.7 mb/d. Global refinery throughputs are forecast to increase by a further 0.7 mb/d in the third quarter, with annual gains shifting to the non-OECD. New capacity start-ups in 2015 and 2016 will put margins under pressure.

The July OMR also features a focus on the demand implications of the Greek debt crisis as well as analysis of OPEC capacity, Petrobras and refinery capacity additions.

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