The International Energy Agency (IEA) has lowered its projections of growth for world oil demand for next year to 1.2 million barrels per day (MMbd), to 95.7 MMbd in total. This review responds to the negative global macroeconomic perspectives after a downward review of 0.2 in world GDP growth for the next two years by the International Monetary Fund. Based on such data, the energy agency concludes that several economies will be affected, particularly those dependent on oil such as Canada, Brazil, Venezuela, Russia and Saudi Arabia.
For 2015, however, the report still maintains positive data, with a demand that would reach to 94.5 million in total (1.8 MMbd more), which accounts for the most relevant increase in the last five years, thanks to the incentive that low prices have represented for consumption, but which will disappear in 2016 according to the projections of the agency. “A sharp deceleration of demand growth next year and the early arrival of the additional Iranian barrels would probably maintain the market oversupplied until 2016,” adds the report. (See Figure).
On the other hand, world supply in September reached 96.6 million barrels, dragged by a lower production from non-OPEC members, while those which are actually members broke a new record by reaching 31.57 million barrels per day, its highest level since 2012, boosted by Iraq’s contribution, which has replaced Saudi Arabia this month as the country that grew the most in terms of production. In total, 96 million barrels per day worldwide are expected to be reached this year.
Thus, projections of the IEA point out that supply in 2016 will be marked by a contraction in production in countries with higher costs. Specifically, the agency points the non-OPEC producing markets, which may undergo a decrease in production of half a million barrels per day as a result of the cut in investments in exploration and production caused by low prices. The key player of this supply fall so far would be for the United States, leader of the shale revolution, which production may fall to 12.56 MMbd in 2016, as opposed to 12.75 million this year, according to data from the IEA.
Therefore, the balance between supply and demand is yet to happen and depends on several questions. The IEA indicates new uncertainties such as the recent intervention of Russia in Syria, but insists in the fact that the main factor to consider for 2016 will be the capacity of Iran to incorporate into the market, at a faster or slower pace, when international sanctions affecting its oil exports are lifted. Experts claim that it will take at least six months and that it would be capable of contributing 3.6 MMbd to the market.