Global oil demand to slow in 2016: IEA

Global oil demand growth is forecast to slow next year to 1.2 million barrels per day (mbpd) from an average 1.4 mbpd this year, according to a latest report by International Energy Agency (IEA).

In its Oil Market Report for July the Paris-based agency, which tracks oil needs of the developed world said, oil demand which peaked in the first quarter at 1.8 mbpd will continue to ease in 2015 and into 2016 as temporary support fades.

The market could become more off-balance, putting downward pressure on oil prices and a rebound is not expected anytime soon.

Oil prices have plunged by about a half compared to a year ago on supply glut and weak demand. Yesterday, Brent crude was traded at $58.73 a barrel, falling over 10 per cent in the past one month.

''The bottom of the market may still be ahead,'' the report said. ''Rebalancing that began when oil markets set off an initial 60 per cent price drop a year ago has yet to run its course.''

On the other hand, global oil supply surged by 550,000 bpd in June on higher production form both Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC producers. The world oil production hit 96.6 mbpd, an impressive 3.1 mpbd higher than a year ago with OPEC accounting for 60 per cent of the gain.

OPEC output hit a three-year high of 31.7 mbpd, up by 1.5 mpbd over the previous year, on the back of record production from Iraq, Saudi Arabia and the United Arab Emirates. Defying the odds, Iraq boosted its oil production to a record 4.12 mbpd in June.

Inventories held by Organisation for Economic Cooperation and Development (OECD) nations surged to a record 2,876 mb in May, up by 38 mb.

The OECD refinery output is expected to increase to 78.7 mbpd in the second quarter driven by strong refining margins, which is likely to come under pressure due to new capacity additions this year and next year.

''Non-OPEC supply growth is expected to grind to a halt in 2016, as lower oil prices and spending cuts take a toll,'' the report said.

Russian production will barely increase 65,000 bpd this year before declining 120,000 bpd next year due to lack of adequate investment.

US oil output gain is expected to decline drastically from 850,000 bpd this year to 290,000 bpd in 2016, after posting a record boost of nearly 1.7 mbpd last year, due to lower oil prices, as many rigs become uneconomical.

However, oil consumption in Asia is expected to post strong growth.

The report also focuses on demand implications of lifting of western sanction on Iran, Greek debt crisis, output push by OPEC among others.