OREANDA-NEWS. World oil demand growth will slow down to 1.2mn b/d in 2016 from a five-year high of 1.8mn b/d this year because of recent downgrades to the global economic outlook and fading support from lower oil prices, according to the IEA.

"The anticipated slowdown is in sharp contrast to surprisingly strong consumption this year that has been revised up to an estimated 94.5mn b/d," the IEA said in its monthly Oil Market Report (OMR). The energy watchdog last month forecast global demand to increase by 1.7mn b/d this year and by 1.4mn b/d next. Now it expects consumption to reach 95.7mn b/d in 2016.

The IMF this month revised downwards its expectations for global economic growth by 0.2 percentage points for this year and next.

But the IEA said recent strength in global oil demand "continued unabated" into the third quarter 2015, led by the US, China and Europe.

"Up by around 1.9mn b/d year-on-year in the second and third quarters of 2015, global growth attained its highest pace since the fourth quarter of 2010", the IEA said.

The watchdog expects non-Opec output to fall by nearly 500,000 b/d to 57.8mn b/d in 2016 — after a forecast rise of 1.2mn b/d this year — because of lower oil prices and upstream spending cuts of more than 20pc, which affect new and existing projects.

"A remarkable decline in costly infill drilling, required to stem declines at producing fields, is already evident with rates in some areas dropping by more than 50pc so far this year — nearly double that seen in previous downturns," it said.

Lower oil prices are also hurting low-cost Opec producers, the IEA said.

"Spending curbs and a severe financial crisis are limiting supply growth in the near term in Iraq… production from neighbouring Iran could be on the rise once it is released from international sanctions and ramps up towards 3.6mn b/d from 2.9mn b/d currently."

The IEA forecasts call-on-Opec crude at at 29.7mn b/d this year and 31.1mn b/d in 2016, the latter some 200,000 b/d lower than in the previous OMR.

"Oil at $50/bl is a powerful driver in rebalancing the global oil market, but the big question is just when will equilibrium be restored," the IEA said. "A projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrels — should international sanctions be eased — are likely to keep the market oversupplied through 2016."

The IEA also highlighted rising geopolitical tensions, noticing this creates uncertainty even if the global oversupply is moderating the market's reaction.

Opec said yesterday it expects global oil demand to growth by 1.5mn b/d this year and 1.25mn b/d in 2016. The organisation sees call on its crude at 29.6mn b/d this year and 30.8mn b/d in 2016.