IEA 2017 oil forecast: Reasons for slowdown in oil demand

Global oil demand is expected to decelerate, as the IEA 2017 oil forecast sees the growth of the global oil demand to rise only by 1.2 million bpd. What is for OPEC oil cut deal?

25 October, AtoZForex Fatih Birol, the Chief of the International Energy Agency (IEA) believes that the global demand for oil is expected to rise by only 1.2 million barrels per day (bpd) in the next year, compared to 1.8 million bpd increase in this year.

IEA 2017 oil forecast

Discussing the oil demand issue on the sidelines of the International Energy Week in Singapore, Mr. Birol has stated that the oil demand growth could potentially weaken further, in case the oil prices will continue rise.

Currently, the International benchmark Brent crude oil futures LCOc1 have gained almost double from their figures in January. Mr. Birol has added that the sluggishness in the demand growth would mostly mean that the stabilizing of the oil markets in terms of demand and supply would not take place until the second half of the next year.

Moreover, the executive director of IEA doubts the effectiveness of the oil cut deal by the Organization of the Petroleum Exporting Countries (OPEC). He questions the ability of the deal to drive the oil prices up, as this could possibly encourage the oil production elsewhere, further complicating the oil markets stabilization issue.

China is the key driver for oil demand growth

In addition, Fatih Birol has stated:

“If there is an increase in the prices as a result of this (OPEC-led) intervention, we may well see a response from higher cost production.”

He also believes that at the price level of $60 a barrel, the US shale oil and offshore projects in Latin America could be restarted. In spite of the overall deceleration in oil demand, China, which is the main driver of the demand growth in the recent years, is expected to further increase its oil imports. This is due to the decline in China’s domestic crude production, which is caused by the lower prices. Mr. Birol further stated that China is still the significant driver of the growth of global demand for oil.

The prices of oil slid on Tuesday on the doubts about the success of the OPEC oil cut deal, as earlier Iraq has refused to be a part of the agreement. The stronger dollar is also weighed on the oil prices.

International Brent crude oil futures dropped 8 cents to $51.38 a barrel at 0528 GMT, where the US West Texas Intermediate (WTI) crude futures were changing hands at $50.51 a barrel, down 1 cent.

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