Oil demand growth seen slowing for a second year

Oil demand growth seen slowing for a second year

Oil demand growth seen slowing for a second year

Oil prices pushed higher on Thursday after the International Energy Agency said global demand for oil is close to outstripping supply following nearly three years of surplus production.

Demand growth for 2017 is now expected to be 1.3 million barrels per day, down from the IEA's previous forecast of 1.4 million.

In a monthly report released Wednesday, OPEC said its output continued to fall in March, but the cartel raised its 2017 forecast for supply growth in the U.S.by 200,000 barrels a day.

"The main impetus comes from the USA, where monthly data shows that output reached 9 million barrels per day in March, up from a trough of 8.6 million barrels per day in September 2016", said the IEA. They have averaged about $55 a barrel so far this year, up from about $45 a barrel for the whole of last year, as the production restraint deal by Opec and 11 non-Opec producers has begun to eat into the record world oil stockpile.

On the demand side, the IEA revised down its estimates for the worldwide thirst for oil, meaning there will be more oil available than previously thought.

"It is now half time for the six-month oil production cuts agreed by Opec and eleven non-Opec countries".

The EIA's report also showed that US crude production last week increased by 36,000 barrels per day to a total of 9.235 million barrels a day.

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"Oil products are definitely in the driver's seat, with solid demand and plenty of refinery outages buoying "cracks", says Michal Meidan, an Asia analyst at the consultancy Energy Aspects.

"The net result is that global stocks might have marginally increased in the first quarter, versus an implied draw of about 0.2 million barrels per day", the Paris-based IEA said.

The IEA also warned global energy demand growth could weak this year as Russia, India, Korea, the United States and some Middle Eastern countries slow.

Brent crude traded at around $55.83 a barrel on Thursday shortly after the European open, down 0.04 percent, while US crude was around $53.05 a barrel, down 0.11 percent.

The combination of factors could keep a lid on oil prices, which have risen in the past six months after a three-year slump.

Even at this mid-way point, we can consider what comes next.

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