The International Energy Agency says it does not see an immediate rebound in low oil prices, despite its growing global demand.
The agency in its report on Wednesday said that global oversupply was so great that it would last through 2016.
The West’s energy watchdog said it was steeply raising its demand growth outlook for this year and 2016, and expected non-OPEC supply growth to decline next year, with U.S. producers hardest hit.
“While a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016 – suggesting global inventories will pile up further,’’ the Paris-based IEA said.
The view from the IEA chimes with that of the U.S. government, which on Tuesday lowered American production forecasts.
The forecasts signalled that a 60 per cent rout in benchmark prices since last summer may finally be weighing on shale output.
Oil prices have fallen to below $50 per barrel, pressured by an abundance of supply and a strong dollar.
The views from the IEA are more bullish than those of OPEC, which on Tuesday raised its forecast of oil supplies from non-member countries.
The IEA said it saw global oil demand rising by 1.6 million barrels per day (bpd) in 2015, up 260,000 bpd from its forecast last month.
It cited solid economic growth and consumers responding to lower prices.
“That’s the biggest growth spurt in five years and a dramatic uptick on a demand increase of just 0.7 million bpd in 2014,’’ it said.
It added that persistent macroeconomic strength would support above-trend growth at 1.4 million bpd in 2016, up 410,000 bpd from its previous forecast.
The decline in crude prices has prompted oil companies to cut their investment plans.
“While a drop in costs and efficiency improvements will help to offset some of the spending cuts, output is likely to take a hit soon.
“This outlook does not include potentially higher Iranian output in the case of sanctions being lifted,’’ the IEA said. (Reuters/NAN)