Global crude oil production lags behind demand, says IEA

Global production of crude oil is falling behind demand, according to the International Energy Agency (IEA), a Paris agency that monitors energy trends for oil-consuming nations.

Worldwide production of crude oil is likely to lag behind demand by almost one million barrels a day from July to September, said the IEA. The current crude oversupply is clearing out even as OPEC (Organization of the Petroleum Exporting Countries) producers are pumping at record or near-record levels.

“Our balances show essentially no oversupply during the second half of the year,” the IEA said in its monthly report.

For the past two years, oil market prices collapsed because of a flood of new crude from places like the US and Canada and ramped up production in traditional producers like Saudi Arabia and Iraq. Prices this year fell to US$27 a barrel, a 13-year low and down from a peak of US$114 a barrel in June 2014.

The IEA said that deep output cuts by non-OPEC producers and a healthy global demand for crude oil are the reasons why the glut is disappearing.

In North and South America alone, crude production is projected to fall by 700,000 barrels a day in the third quarter of 2016, compared with the first quarter, according to the IEA.

On a gloomy note for oil producers, the IEA trimmed its forecast for the rise in the world’s oil demand next year, predicting that global economic growth would fall short of previous projections.“Some momentum will be lost in 2017,” the IEA said, though its forecast expansion of 1.2 million barrels a day “is still above trend.”

An oil-price rally that began in June and reached US$52 a barrel was halted by a huge buildup of oil kept in storage and a new glut of refined fuel products like gasoline that have cooled down demand for crude from refineries, the IEA said. In the Organization for Economic Cooperation and Development, a group of countries with advanced industrial economies, crude-oil inventories rose to a record 3.09 billion barrels in June, the agency said.

It will take months to use up those stocks, the IEA said, and the oil market has fallen into bear-market territory.

The IEA said refineries would process record volumes of crude this summer, drawing down those stocks and helping ease the remaining gluts in products and inventories—potentially raising prices