World oil demand is expanding at its fastest pace in five years thanks to rebounding economic growth and low prices, but global oversupply will last through 2016, the West’s energy watchdog said on Wednesday.
The International Energy Agency said in a monthly report that 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 U.S. production forecasts, signaling that a 60 percent 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.
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