Global demand growth is expected to slow from its five-year high of 1.8 mb/d in 2015 to 1.2 million barrels per day (mb/d) in 2016 — closer towards its long-term trend as previous price support is likely to wane, the IEA Oil Market Report for October informed subscribers. Recent downgrades to the macroeconomic outlook are also filtering through.
For those who believe supply will not drop, the IEA has an answer:
OPEC crude supply rose by 90 0000 barrels per day (90 kb/d) in September to 31.72 mb/d as record Iraqi output more than offset a dip in Saudi supply. A slowdown in forecast demand growth and slightly higher non-OPEC supply lowers the 2016 “call” on OPEC by 0.2 mb/d from last month’s Oil Market Report to 31.1 mb/d.
OECD commercial inventories extended recent gains and rose by 28.8 mb in August to stand at 2 943 mb by end-month. Since this was nearly double the 15.0 mb five-year average build for the month, inventories’ surplus to average levels widened to 204 mb.
In other words, Iraq supply will be among the wild cards next year.
Not as prominent in the analysis is whether U.S. frackers, hurt by the falling price of crude, will live to fight another day. With the large number of frackers and their varied financial capacity, it is hard to tell, but America is not awash in anything more than liquidity. Fracking’s best days may still be ahead.
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