Leading oil producers meet in Doha today amid challenging market conditions although the International Energy Agency (IEA) remains confident that the global oil demand will grow in 2016.
The Paris-based autonomous intergovernmental organisation in its latest Oil Market Report yesterday said the global oil demand will grow by 1.2mn barrels per day (bpd), mainly driven by India, which IEA estimates, can replace China as the main engine of global demand growth.
Opec production slipped by 90,000 barrels a day to 32.47mn barrels per day in March, according to the IEA. The agency forecasts Opec production at 32.8mn bpd in the second quarter and 33mn bpd the third and fourth quarters of this year.
The non-Opec supply dropped by an estimated 710,000bpd to 57mn bpd in March, which remains unchanged from IEA’s February report.
The decline in non-Opec supply combined with demand growth that is both lower than last year and basically steady at 1.2mn bpd leads the IEA to conclude that “the oil market looks set to move close to balance in the second half of this year.”
With regard to emerging economic power house India, IEA says for 2016 as a whole, India will see growth of around 300,000bpd – the strongest ever volume increase.
“Strong gains in India remain one of the most persistent demand supports showing that if an economy remains fundamentally robust, lower-oil prices can stimulate additional demand,” the IEA noted.
Those gains will help offset some of the sluggish demand for oil in China, the United States and much of Europe, the Paris-based group said.
India’s economy last year grew at an average rate of 7.5%, faster than the 6.9% growth in China, official data show.
Although India has seen declines in exports, railway freight, cement production and investment, Indian economists say the nation remains a “rare bright spot” among emerging economies. Beyond economic growth, the IEA said government reforms to India’s energy sector are also boosting the country’s appetite for oil.
India is already Asia’s third-biggest economy. Strong gains in India remain one of the most persistent demand supports showing that if an economy remains fundamentally robust lower oil prices can stimulate additional demand.
Considering various factors, IEA seems confident that with steady oil demand growth and falling non-Opec supply, the oil markets looked set “to move closer to balance in the second half of this year”.
Meanwhile in Doha, major producers representing some 15 countries will discuss a deal today to freeze oil production at January levels in a bid to trim the global oversupply of crude oil.
The atmosphere among oil producers is positive ahead of the meeting in Doha today.
Doha’s decision to host the high-level ministerial meeting today follows ongoing discussions among Saudi Arabia, Opec president Qatar, Venezuela and Russia on proposals to freeze production.