OPEC and IEA Do Not Expect Growth in Demand for Crude Oil in 2017.

The excessive supply of crude oil in the global market will continue in 2017 due to producers outside the OPEC alliance who manage to survive in the market despite difficulties, as well as the further slow growth in demand. This is evident from the latest reports from OPEC and the International Energy Agency, so trading in crude oil on the capital market will remain in existing price ratios for a longer time, with limited growth opportunities. This is the view of Saxo Bank, which reminds that last week’s price recovery was only a temporary disruption due to delivery delays and inventory reductions.

The biggest surprise in OPEC’s monthly report is the revision of supply estimates from sources in non-OPEC countries, shifting from a deficit to a surplus for the next year. Instead of the expected decline of 150,000, they have come to an increase of 200,000 barrels per day. The main reasons for such changes are, as stated in the report, a smaller decline than expected among high-cost producers in the U.S., combined with the start of operations at the Kashagan oil field in Kazakhstan, which has long been delayed – explains Ole Hansen, the chief commodity strategist at Saxo Bank.

Thus, the oil cartel, which had production of 33.24 million barrels per day in August, has reached a surplus of 750,000 barrels per day, which will be the average needed by OPEC’s global oil consumers in 2017. We must not forget the expected increase in production from Iran, Nigeria, and possibly Libya next year, reminds the lead analyst for crude oil at the Danish investment bank.

The IEA’s report, on the other hand, has reduced estimates for crude oil demand by 200,000 barrels per day in the second half of 2016 and throughout 2017, with this estimate being attributed to the increasingly weaker overall incentives brought by cheap oil, economic concerns in developing countries, and a dramatic slowdown in demand in China and India – notes Hansen, adding that the IEA has therefore changed its stance on the long-standing disruption in the oil market and instead of the expected stabilization this year, now estimates that inventories will continue to build for the fourth consecutive year, including throughout 2017.

China and India, as the driving forces of global demand, have indeed slowed development trends during the third quarter, and all estimates indicate a recovery in supply from high-cost producers in the U.S. in the second half of 2017. Therefore, trading in crude oil is expected to be between $40 and $50 per barrel in the near future, unless OPEC and Russia reach a solution next week on how to halt the supply of quantities to the global market at the meeting in Algeria. However, this is unlikely, conclude the offices in Copenhagen.