OREANDA-NEWS. The IEA has increased its global oil demand forecast for this year and next thanks to economic growth and lower oil prices. But it sees non-Opec oil supply contracting in 2016, increasing the call on Opec crude as a result.

Consumption is now expected to grow by 1.6mn b/d in 2015 — the fastest in five years — and 1.4mn b/d next year, compared with last month's projections of 1.4mn b/d and 1.2mn b/d respectively, the IEA said in its monthly Oil Market Report (OMR). Global demand rose only by about 700,000 b/d last year.

Consumption is now seen at 94.2mn b/d in 2015 and 95.6mn b/d in 2016.

Opec also increased its 2015 global oil consumption forecast yesterday. The revision means Opec now sees demand growth next year as lower than this year, in line with the IEA's view.

"From the driller in the Bakken to the motorist at the pump, oil market players are adjusting to a world of lower prices," the IEA said today. But global supply is currently running 2.7mn b/d above a year earlier, according to the watchdog.

"While a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016 — suggesting global inventories will pile up further," the IEA said. It sees the surplus at about 850,000 b/d next year, with a potential stock draw no sooner than the fourth quarter of 2016. These projections do not include any potentially higher Iranian output if sanctions against the country are lifted.

Oil prices have fallen in recent weeks, prompting oil companies to further shrink their investment plans. "While a drop in costs and efficiency improvements will help to offset some of the spending cuts, output is likely to take a hit soon," the report said. "As such, non-Opec supply growth is expected to decelerate through the end of the year and decline in 2016 — with the US hardest hit."

Non-Opec oil production fell by almost 600,000 b/d last month compared with June to58.1mn b/d because of slowing US supply and seasonal North Sea maintenance, but remained almost 1.2mn b/d above a year ago. Non-Opec supply is set to grow by 1.1mn b/d this year to 58.1mn b/d and contract by about 200,000 b/d in 2016 to 57.9mn b/d, compared with an increase of 2.4mn b/d in 2014.

"While reduced capital spending will help rebalance the market in the short term, it will no doubt also lead to lower future supply growth," the IEA said. "This will become increasingly sensitive if demand continues above-trend, as it has so far in 2015."

The IEA sees the call on Opec crude at 30.8mn b/d in 2016, up by about 600,000 b/d from its July forecast and by some 1.4mn b/d on this year. Opec's own estimates put the call at 29.2mn b/d in 2015 and 30.1mn b/d next year, well below the declared output of its members.