The International Energy Agency Friday cut its estimates of global oil demand growth this year and next by 100,000 b/d each, while raising its estimate of this year’s growth in non-OPEC supply to 2.2 million b/d, but said continued strains on the system were likely to lead to higher prices. In its latest monthly oil market report, the IEA cut its estimates of global demand growth to 1.3 million b/d for this year and 1.4 million b/d next year, citing currency depreciations, trade disputes and a revision to its data on China. With Brent crude prices now “established” above $80/b, “expensive energy is back, with oil, gas and coal trading at multi-year highs, and it poses a threat to economic growth,” the IEA said.
In the current quarter the world has reached “twin peaks for demand and supply by straining parts of the system to the limit. Recent production increases come at the expense of spare capacity, which is already down to only 2% of global demand, with further reductions likely…This strain could be with us for some time and it will likely be accompanied by higher prices,” the IEA said. The IEA raised its estimate of non-OPEC oil supply growth this year from 2 million b/d in last month’s report, while it kept the corresponding estimate for next year unchanged at 1.8 million b/d. Led by US production, “global oil supply is growing at a relentless pace, even as Venezuelan production deteriorates and Iranian flows decline ahead of US sanctions,” the report said. The oil market is “adequately supplied for now.”
It added that global oil supply was up 2.6 million b/d from a year earlier in September, led by North America and Russia, even as non-OPEC output dropped by 140,000 b/d in August due to seasonal reductions in Canada and Norway. US oil production reached a record-high 15.6 million b/d in July, up 2.4 million b/d year on year, while US offshore production in the Gulf of Mexico rose by 190,000 b/d to a record-high 1.85 million b/d, it said. The US “remains the engine of non-OPEC supply growth, propelled by expansions in the shale patch and rebounding output offshore,” it said.