Despite surging global demand the International Energy Agency said on Wednesday that it expects the current global oil glut to last until the end of 2016.
In its monthly report, the International Energy Agency (IEA) revised its demand growth outlook for 2015 upwards to 1.6 million barrels per day, a 0.2 million bpd jump from its previous report.
The figure marks the fastest pace of growth in five years and is being driven by more stable economic growth and consumer response to lower oil prices, the IEA said.
The agency also revised its 2016 demand grow outlook up to 1.4 million bpd, a 410,000 bpd boost over its last forecast.
World oil supply dipped nearly 0.6 million bpd in July, mainly on lower non- OPEC output.
Non-OPEC supply growth is expected to “slow sharply” from a 2014 record of 2.4 million bpd down to 1.1 million bpd in 2015 and then contract further by 200,000 bpd in 2016, the IEA said.
The agency said the expected non-OPEC growth slowdown is tied to lower oil prices and spending cuts.
Assuming OPEC production holds at its current three month average of about 31.7 million bpd through 2016, global supply will outstrip demand by 1.4 million bpd during the second half of 2015, Reuters noted.
The surplus is expected to fall to about 850,00 bpd in 2016.
The first quarter of a potential stock draw is not expected until the final three months of 2016.
The agency’s current outlook does not include a potential production ramp up in Iran if western sanctions are lifted.
OECD inventories rose counter-seasonally by 9.9 million barrels and hit another all-time high of 2.916 billion barrels in June, with their surplus to average levels also widening to a record 210 million barrels, the IEA added.