While U.S. production is slowing a global oil glut is expected to persist into 2016, a new report by the International Energy Agency said.
The agency’s monthly oil market report, published on Tuesday, said that global demand growth is expected to slow from a five-year high of 1.8 million bpd in 2015 to 1.2 million barrels per day in 2016.
World oil supply held steady near 96.6 million bpd in September despite a nearly 50 percent fall in the U.S. rig count and a 114 rig year-over-year drop in the international rig count, according to Baker Hughes.
Non-OPEC production did slip in September but that decline was offset by a slight jump in OPEC production.
Non-OPEC producers accounted for just under 40 percent of the 1.8 million bpd annual increase in total oil output, the report said.
Lower oil prices and steep spending curbs are expected to cut non-OPEC output by nearly 0.5 million bpd in 2016.
The U.S. Energy Information Administration currently projects that U.S. production will drop by 100,000 barrels per day this year.
While non-OPEC supplies are projected to shrink next year, weak global economic growth is expected to dampen energy demand.
Steady OPEC production will also feed the crude glut as the group continues to hold its production target at 30 million bpd.
Despite push back from some smaller members, OPEC has given no indication that it will change the target at its next meeting on December 4.
OECD commercial inventories built on recent gains in August and climbed by 28.8 million barrels to 2.943 billion barrels at the end of that month.
“Since this was nearly double the 15.0 million barrel five-year average build for the month, inventories’ surplus to average levels widened to 204 million barrels,” the IEA said.
Global refinery runs “remained remarkably strong,” particularly in Asia and the Middle East, sending global throughputs up nearly 2 million bpd from a year ago, the report said.
The IEA has lowered its “call” on OPEC by 0.2 million bpd from last month’s oil market report to 31.1 million bpd as it forecast a slowdown in demand growth and slightly higher non-OPEC supply next year.
The pending rollback of Iranian crude sanctions could also boost crude supply, but experts are divided on how long it would take the oil rich country to make a dent in global markets.