Consumption will expand by 230,000 barrels a day less than estimated in November, the Paris-based adviser to 29 nations said in a report today. Output from nations outside of the Organization of Petroleum Exporting Countries will grow at a faster pace than the agency predicted last month. Production rising faster than demand could strain some nations’ ability to store oil by the middle of next year, it predicted.
The agency cut projections because the economies of producer nations are being hurt by tumbling prices, according to the report. Most of the reduction in next year’s estimate is attributable to Russia, where sanctions are hobbling growth, it said. Brent crude costs that collapsed 43 percent this year are too low for 10 of OPEC’s 12 members to balance their budgets, data compiled by Bloomberg show.
“Part of the reason we’re not seeing demand being revised higher is because there’s a haziness on the transmission effect” of lower oil prices to the wider economy, Miswin Mahesh, an analyst at Barclays Plc, said by phone from London. “We expect to see the effects of lower prices feeding through in the second half of next year.”
The IEA also cut estimates for the amount of crude needed next year from the Organization of Petroleum Exporting Countries by 300,000 barrels a day. The group will need to pump an average of 28.9 million barrels a day in 2015, about 1.4 million less than its 12 members produced last month and below the 30-million-barrel target agreed on Nov. 27.
Russian Demand
Oil extended losses to a five-year low today. West Texas Intermediate crude for January delivery dropped as much as 1.9 percent to $58.80 a barrel in electronic trading on the New York Mercantile Exchange. Brent for January settlement slid as much as 1.5 percent to $62.75 a barrel on the London-based ICE Futures Europe exchange.
World oil consumption will increase by 900,000 barrels a day, or 1 percent, next year to average 93.3 million barrels a day, according to the report. The IEA curbed estimates for Russian oil demand in 2015 by 195,000 barrels a day to 3.4 million a day. It kept estimates for global demand growth this year unchanged at 700,000 barrels a day.
“Some of the places where demand had been growing particularly fast in recent years had been producer countries because record-high prices were a huge stimulus,” Antoine Halff, head of the IEA’s oil industry and markets division, said by phone from Paris. “Now those countries are affected very adversely.”
Russia’s currency is on course for its worst year since the nation’s 1998 default, amid a battering from falling oil prices and sanctions over the conflict in Ukraine. The nation’s government said for the first time last week that the economy will probably contract 0.8 percent in 2015, the worst performance since it shrank 7.8 percent in 2009.
Non-OPEC Growth
The IEA boosted projections for supplies outside OPEC in 2015 by 200,000 barrels a day, forecasting output will expand by 1.3 million barrels a day to 57.8 million a day. Non-OPEC supply will climb by a record 1.9 million barrels a day this year, it estimated.
“Despite lower crude oil prices, we expect U.S. production to continue to grow apace in 2015,” expanding by 685,000 barrels a day, the agency said.
OPEC output declined by 315,000 barrels a day last month because of disruptions in Libya, where production fell by 180,000 barrels a day to 690,000 a day following an attack at El Sharara, the country’s biggest oil field.
Production in Saudi Arabia, OPEC’s biggest producer, fell by 70,000 barrels to 9.61 million barrels because of the closing of the Khafji oilfield that the kingdom shares with Kuwait, the IEA said.
Global oil inventories may rise by 297 million barrels in the first half of next year, it said. That could lift stockpiles to 2.87 billion barrels in OECD countries, straining some nations’ ability to store, it said.
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