Global oil demand is expected to grow at its fastest pace in five years in 2015, the International Energy Agency (IEA) said Wednesday, but lower oil prices and spending cuts will “take a toll” on producers outside the Organization of Petroleum Exporting Countries (OPEC).
While crude oil prices fell sharply during July and into early August, thanks to a glut of supply and a strong U.S. dollar, the IEA noted in its latest monthly report that it expected demand to pick up.
“Global oil demand in 2015 is expected to grow by 1.6 million barrels a day (mb/d), up 0.2 mb/d from our previous report and the fastest pace in five years, as economic growth solidifies and consumers respond to lower oil prices,” the IEA said.
“Persistent macro-economic strength” supports above-trend growth of 1.4 million barrels a day in 2016, the IEA added.
Although demand is expected to rise, the IEA noted that the global oil supply also continues to grow at “breakneck speed” — currently running 2.7 mb/d above a year earlier – despite the collapse in oil prices.
Global oil markets slumped last June from around $114 a barrel on the back of a glut in supply and lack of demand, caused by an uncertain global growth outlook. Over a year on, and benchmark Brent crude on Wednesday was trading at $48.95 a barrel and U.S. light crude around $42.98.
On Wednesday, crude oil prices fell again as China allowed its currency to fall sharply for a second day, triggering concerns over the country’s economic health and the impact on oil demand.
OPEC versus non-OPEC
What has made matters worse for oil prices is the decision by the OPEC, a 12-country oil producing group led by Saudi Arabia, not to cut their production ceiling of 30 mb/d, despite the slump in prices and demand.
It has even been exceeding that limit and in the organization’s latest report, published on Tuesday, said its production reached a three-year high this summer and that its members produced 31.51 mb/d in July.