Oil’s slump could be deeper than forecast, as oil demand is set to plunge further than previously expected.
More bad news for oil producers: Until now, crashing oil prices have kept demand afloat. But that’ll come tumbling down too by next year, according to a new forecast from the International Energy Agency.
The agency is now expecting oil demand to grow by just 1.2m barrels a day in 2016, taking total demand to 95.7m barrels a day, according to its latest monthly report. The energy forecaster said the economic slowdown in oil-dependent markets following the continuing commodities rout would begin hitting against demand:
Lower commodity prices, with all else held equal, eventually equate to lower public spending and a potential dampening in consumer expenditure in many of these countries.
The IEA’s latest growth forecast has been revised down from the previous figure of 1.4m barrels a day. By contrast, in 2015, demand grew by 1.8m barrels a day.
This follows on Opec's monthly report yesterday, suggesting that a drastic output slowdown in non-Opec countries would help to rebalance the market.
Oil prices have halved in the past year, with international benchmark Brent crude down from over $100 a barrel in July 2014 to trade at $50.63 yesterday. US benchmark West Texas Intermediate has made a similar downward journey.
All this means the global oil glut could last longer than expected. The IEA has said slowing demand growth is “likely to keep the market oversupplied through 2016”.