Oil glut’ll persist into 2017 – IEA

.Says global demand growth slower than initially predicted

.Trims global oil demand for 2017 by 200,000bpd to 97.3mbpd

The International Energy Agency (IEA) has said surplus in global oil markets will last for longer than it earlier predicted, stretching into 2017.

In its newly released report for September, the Agency said global consumption growth dropped to a two-year low in the third quarter as demand faltered in China and India, while output from OPEC’s Gulf members keep growing. Just last month, the agency predicted the market would return to equilibrium this year.

“Supply will continue to outpace demand at least through the first half of next year,” IEA said in its monthly report, adding, “As for the market’s return to balance -it looks like we may have to wait a while longer.”

It is almost two years after the Organisation of Petroleum Exporting Countries (OPEC) set a strategy to eliminate the global oil glut by pressuring rivals with lower prices, yet the market struggles to balance with prices of excess supply and crude remaining below $50 a barrel.

OPEC said it would hold freeze talk with Russia this month, increasing hope for freeze deal to increase prices.

The IEA reduced global demand for oil next year by 200,000 barrels a day to 97.3 million a day. It reduced growth estimates for this year by 100,000 barrels a day to 1.3 million a day, citing a “dramatic deceleration in China and India” this quarter coupled with “vanishing growth” in developed economies.

“Recent pillars of demand growth – China and India – are wobbling,” said the IEA, which counsels 29 nations on energy policy.

“The stimulus from cheaper fuel is fading. Refiners are clearly losing their appetite for more crude oil.”

The report said supplies outside OPEC will bounce back next year after this year’s sharp decline, rising by 380,000 barrels a day.

The estimate is “marginally” higher than last month, driven by the stronger-than-expected performance of Norway and Russia. U.S. shale-oil production will begin to recover in the second half of 2017, it said.

Production from OPEC’s 14 members rose slightly last month as Gulf countries Saudi Arabia, Kuwait and the United Arab Emirates pumped at or near record levels and as Iraq pushed output higher, the IEA said.

Saudi Arabia has overtaken the U.S. as the world’s largest oil producer -when non-crude forms like natural-gas liquids are included – a ranking America held since April 2014.

Kuwait and the UAE hit their highest output ever and Iraq lifted supplies. Output from Saudi Arabia held near a record, while Iran reached a post-sanctions high. Overall OPEC supply stood 930 kb/d above a year ago.

The combination of faltering demand and increased OPEC output pushed oil inventories in developed nations to a record in July, at 3.1 billion barrels.

“Demand growth is slowing and supply is rising,” the agency said.

“Consequently, stocks of oil in OECD countries are swelling to levels never seen before.”

For 2016, a gain of 1.3 mb/d is expected – a downgrade of 0.1 mb/d on previous forecast due to a more pronounced 3Q16 slowdown. Momentum eases further to 1.2 mb/d in 2017 as underlying macroeconomic conditions remain uncertain.

Meanwhile, the IEA said world oil supplies fell by 0.3 mb/d in August, dragged lower by non-OPEC. At 96.9 mb/d, global oil output was 0.3 mb/d below a year ago, but near-record OPEC supply just about offset steep non-OPEC declines. Non-OPEC supply is expected to return to growth in 2017 (+380 kb/d) following an anticipated 840 kb/d decline this year.

“Oil prices rallied in early August, rising from four-month lows near $42/bbl to briefly above $50/bbl amid peak summer demand for crude oil, which is expected to lead to the first quarterly crude stock draw in more than two years. At the time of the report, Brent futures had retreated to around $48.45/bbl while WTI was at $46.35/bbl”, the IEA said.