Oil prices easing on higher demand this year: IEA

The Dollar Business Bureau 

Higher-than-predicted demand should augment prices of oil during 2016, though stocks continued to put downward pressure on prices, the International Energy Agency (IEA) said on Wednesday. 

Revising its previous month's predictions of a rise of 1.3 million bpd, IEA in its monthly oil market report said that this year, the demand for oil globally will increase by 1.4 million barrels per day (bpd) to 96.1 million bpd.

While forecasting a ‘return to balance’ in the entire ‘big picture’ direction of market, the energy agency said that the continuing high oil stocks is a risk to the current stability in the oil prices.

Last month, the IEA had cautioned that significant rise in prices was unlikely as there is a huge inventory overhang to utilise.

The agency pointed out that crude prices had eased in early June from a peak of over $52 per barrel to trade in a range of $45-50 - a complete contrast to the daily price decline in the beginning of this year. 

“Our underlying message that the market is heading to balance remains on track, but the modest fall back in oil prices in recent days to $45 per barrel is a reminder that the road ahead is far from smooth,” the IEA stated. 

The prices of oil, which fell below the $30 mark in the month of January, revived earlier this week against a two-month low as envisaged by Organization of the Petroleum Exporting Countries (OPEC) which pointed towards the easing of international oversupply. 

In its report in July, the Organisation had predicted that the global oversupply would edge off in 2016 and 2017, as oil producers outside OPEC, primarily the US reduced production. 

For 2017, the IEA predicted an increase of 1.3 million bpd to 97.4 million bpd, in the wake of demand in non-OECD nations, led by China and India. It was forecast that demand in India would increase faster compared to other nations in 2017, while the major restraint on current Chinese data on demand remained sluggish, with an official forecast of easing of economic growth.