In its latest monthly report the International Energy Agency (IEA) reduced its forecast for global demand for oil in 2017 by 100,000 bpd because of a “dimmer macroeconomic outlook,” projecting that consumption will expand by 1.2 million bpd in 2017, down from 1.4 million bpd this year.
The IEA has increased its supply outlook as growing global supply of oil rose by 800,000 bpd in July, with output from OPEC nation rose sharply, is keeping pressure on crude prices that have dropped a fair bit in the past month.
"OPEC crude oil output rose by 150,000 bpd in July to 33.4 million bpd - holding at an eight-year high - as Saudi Arabia produced at the highest ever and Iraq pumped harder," the IEA said.
Production from Saudi Arabia climbed to a record 10.62 million a day, while production in Kuwait and the UAE. also set new highs in July, at 2.87 million daily barrels and 2.97 million respectively, the IEA reported.
Oil inventories have climbed to a record of more than 3 billion barrels in June as stockpiles of refined products expanded by more than four times the seasonal average, making up for a decline in crude stocks, the IEA said.
"The massive overhang of stocks is also keeping a lid on prices, with both newly produced and stored crude competing for market share in an increasingly volatile refinery margin environment."
THE IEA added that slowing demand growth had encouraged struggling refiners to substantially cut output for the first time since 2008-09 and this could be supportive of oil prices.
The report added: "The resulting product stock draw (fall in stockpiles) will increase refiners' appetite for crude oil and help pave the way to a sustained tightening of the crude oil balance."