Market Overview

IEA Says Oil Supply Will Outpace Demand Until At Least Mid-2017

IEA Says Oil Supply Will Outpace Demand Until At Least Mid-2017

The International Energy Agency (IEA) put a damper on the bullish case for oil in its latest report.

The agency said in its latest monthly report on Wednesday that it now expects oil stockpiles to continue accumulating through 2017, which will make the fourth consecutive year in which the world faces an oversupply of oil.

"Supply will continue to outpace demand at least through the first half of next year," the report said. "As for the market's return to balance — it looks like we may have to wait a while longer."

Oil stockpiles rose to a record high 3.1 billion barrels while the amount of crude that refiners process actually grew at the lowest pace in a decade.

Part of the reason for excess oil flooding the market stems from the fact that Saudi Arabia and Iran have each raised their oil output by more than 1 million barrels per day since late 2014. Meanwhile, other oil-rich nations such as Kuwait, the United Arab Emirates and Iraq are producing oil at or near historical all-time high levels.

Related Link: Saudi Arabia Reclaims Title As World's Top Oil Producing Nation

The agency also revised its oil demand growth for 2016 to 1.3 million barrels per day, which represents a drop of 100,000 barrels. For 2017, the agency is expecting demand to further ease to just 1.2 million barrels per day, which marks a downward revision of 200,000 barrels per day from prior estimates.

"When will the world oil market return to balance? That is the big question today," the report concluded. "With the price of oil at current levels, one would expect supply to contract and demand to grow strongly. However, the opposite now seems to be happening. Demand growth is slowing and supply is rising."

Additional Info

On Wednesday, the following figures were also released:

  • IEA distillates inventories for the week ended September 9 were up 4.62 million barrels versus 1.54-million-barrel-build estimate.
  • IEA says crude oil inventories for the week ended September 9 were down 559,000 barrels versus the 3.8-million-barrel-build estimate.
  • IEA gasoline inventories for the week ended September 9 were up 567,000 barrels versus the 343,000-barrel-build estimate.

Below is the infograph circulated by the IEA.

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