Oil futures traded sharply lower on Tuesday after the International Energy Agency cut its crude demand forecast, warning that supply will continue to outpace demand well into 2017.
Futures were trading lower, then took a sharp leg down after the IEA released its closely watched monthly report. The agency downgraded its global oil demand predictions by about 100,000 barrels a day for this year to growth of 1.3 million barrels a day, and cut its forecast for 2017 by 200,000 barrels to growth of 1.2 million barrels a day.
“This supply-demand dynamic may not change significantly in the coming months. As a result, supply will continue to outpace demand at least through the first half of next year,” it said in its report.
Matt Parry, IEA senior oil economist, told MarketWatch that the key takeaway from the report is that global oil demand growth is “slowing very sharply.”
Year-over-year demand growth for the third quarter of 2015 was at 2.3 million barrels a day, he said. That’s down to growth of 1.6 million in the first quarter of this year, 1.4 million in the second quarter and, “worryingly,” a projected growth of 800,000 barrels in the third quarter of this year, he said.
Based on the forecasts, “both Chinese and European oil demand growth have all but vanished by 3Q16,” said Parry.
