The International Energy Agency has left its forecast for Oil demand virtually unchanged and continues to expect increases of just under 700,000 barrels per day for this year and next. Oil supply outside OPEC+ is expected to rise by 1 million barrels per day next year, following an increase of 1.4 million barrels per day this year, which exceeds the rise in demand, according to the IEA forecast, Commerzbank’s commodity analyst Carsten Fritsch notes.
Oil supply outside OPEC+ will to continue to rise
“The demand for Oil from OPEC+ is thus expected to fall to 40.4 million barrels per day next year. Compared with the IEA’s expectation for OPEC+ Oil production, this would result in a surplus of 3 million barrels per day. A surplus of this magnitude would put significant downward pressure on Oil prices, causing them to fall to a level that would make the increase in Oil production outside OPEC+ expected by the IEA unlikely.”
“The IEA’s assumption regarding current and future Oil supply is, however, much more optimistic than that of other market observers. According to the IEA’s monthly report, Oil production by OPEC+ countries bound by quotas was a good 1.1 million barrels per day above the agreed level in July. The OPEC and S&P Global Commodity Insights, by contrast, reported production volumes for July that were below the agreed level.”
“The IEA’s expectation that Oil supply outside OPEC+ will continue to rise into next year is at odds with the US Energy Information Administration, which forecasts a noticeable decline in US crude Oil production next year. All of this points to a considerably smaller oversupply than the IEA’s forecasts suggest.”