The IEA’s global demand growth forecast for 2015 has risen by 1.6 million barrels a day from the prior estimate of 1.4 million barrels a day, and the fastest growth pace in five years. Total daily global demand for the second quarter was estimated at 93.5 million barrels a day. By the fourth quarter of the year, the IEA sees demand rising to 95.24 million barrels a day, with the supply overhang tightening but not disappearing until the second half of 2016.
According to the IEA, OPEC produced 31.8 million barrels a day in July as Saudi Arabia and Iraq increased their output. On Tuesday, OPEC raised its own estimate of demand growth for 2015 and 2016.
The IEA expects non-OPEC supply growth to drop from a record 2.4 million barrels a day in 2014 to 1.1 million in 2015 and then to begin contracting by 200,000 barrels a day in 2016.
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When OPEC released its own Monthly Oil Market Report for August on Tuesday, the cartel estimated world demand in 2015 to reach 92.7 million barrels a day. OPEC’s current supply forecast calls for non-OPEC supply to total 57.46 million barrels a day in 2015.
The IEA noted that global refinery runs reached a record high of 806 million barrels a day in July, up a staggering 3.2 million barrels a day compared with July 2014.
From the IEA’s report:
Even with the slowdown in non-OPEC production and higher demand growth, a sizeable surplus remains. Our latest balances show that while the overhang will ease from a staggering 3.0 [million barrels a day] in 2Q15, its highest since 1998, the projected oversupply persists through 1H16. Assuming OPEC production continues at around 31.7 [million barrels a day] (its recent three-month average) through 2016, 2H15 sees supply exceeding demand by 1.4 [million barrels a day], testing storage limits worldwide. The surplus drains down to about [850,000] in 2016, with 4Q16 marking the first quarter of a potential stock draw. This outlook does not include potentially higher Iranian output in the case of sanctions being lifted.
West Texas Intermediate (WTI) for June delivery traded up about 1.1% on the NYMEX Wednesday morning at $43.57, after closing at $43.08 on Tuesday. Brent traded at $50.15 on the ICE, having closed at $49.71.
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