Oil prices are likely to continue to fall as producers continue to pump more than global demand, the head of the International Energy Agency (IEA) Fatih Birol said on Thursday.

“Given the current weak demand and the large volumes of oil being supplied by non-OPEC countries, mainly producers like the United States, we are likely to see downward pressure on oil prices,” Birol said.

The bearish comments come after a turbulent two weeks for oil markets. Benchmark Brent crude fell below $70 for the first time in nearly three years on Tuesday. Sentiment among traders and speculators has shifted sharply in recent weeks amid concerns about weak growth in major oil consuming nations, prompting OPEC to delay a plan to gradually exit production cuts of more than 2 million barrels per day.

Birol spoke as the IEA released its latest monthly report on the oil market, which showed that global oil consumption increased by 800,000 barrels per day in the first half of this year, just a third of the growth rate in the same period of 2023 and the slowest since the COVID-19 pandemic.

Birol said that while geopolitical tensions and some unexpected production outages would normally support prices, the oil market has turned. "We should also consider that this (the oil price crash) is happening against the backdrop of the closure of 1.2 million barrels per day of Libyan oil production and the war in the Middle East," he said.

A year ago, Birol wrote in the Financial Times that demand for fossil fuels would peak this decade, and the current slowdown reaffirms his expectation that the peak may be imminent.

The IEA lowered its forecast for global oil demand growth in 2024 from 970,000 barrels per day to 903,000 barrels per day, down from more than 2 million barrels per day in 2023; its forecast for global oil demand growth in 2025 remained at 954,000 barrels per day. This is lower than many other forecasters, such as JPMorgan Chase and Citigroup, which expect global oil demand to grow by 1.3 million and 1.5 million in 2024, respectively.

When the IEA first cut its demand growth forecasts 15 months ago, the agency was widely criticised for being too pessimistic, but with only three months left in the year, Birol said their view had proven accurate.

Birol said lower oil prices could boost demand next year, but slower economic growth in Asia and further adoption of electric vehicles around the world would remain headwinds.

“Our demand forecast of 950,000 bpd next year does take into account a rebound in oil demand as a result of lower prices,” he said.

But the oil market is expected to remain oversupplied as non-OPEC producers continue to produce more oil than demand. "We expect production to grow by 1.1 million barrels per day in the United States, Brazil, Guyana and Canada alone," Birol said.

Asked whether OPEC would be able to start increasing quotas from December as planned, he said: "It all depends on the group itself. But one thing is clear. We currently have 6 million barrels per day of spare capacity. This is one of the highest levels in history and it is something that OPEC policy needs to consider."

Article forwarded from: Jinshi Data