Cheap oil set to lose effect on demand growth: IEA

The IEA predicts that supplies outside the of OPEC will decline next year by the most since Y 1992 as low Crude Oil prices take their toll on the USA shale Oil industry.

Crude oil prices fell on Wednesday after industry data showed an increase in USA stockpiles, and as analysts said that US output had been surprisingly resilient in the face of lower prices. The Energy Information Administration will issue official inventory data on Thursday, a day later than usual due to the Veterans Day holiday on Wednesday.

The global Energy Agency (IEA) said there was a record 3 billion barrels of crude and oil products in tanks worldwide.

As of 11:40 front month Brent crude futures were bouncing back by 1.388% to $44.68 per barrel on the ICE. Data from the American Petroleum Institute on Tuesday showed that stockpiles rose by 6.3 million barrels to 486.1 million last week.

“You can talk all you want about oil demand being better next year and beyond, but right now we have a heck of a glut on our hands that I think has to be priced in a few more”, said John Kilduff, partner at NY energy hedge fund Again Capital.

Brent settled down 45 cents at $43.61 a barrel, as the December contract which served as the front-month expired. While the report didn’t specify a reason for Iraq’s decline, storms have disrupted loading at Basra oil terminal in the south of the country and sabotage attacks have reduced flows through the Kurds’ export pipeline in the north. Slowing non-OPEC supply and rising demand for winter fuels could “help alleviate the current overhang”, enabling a recovery in prices, it said.

The market was also pulled lower this week by the strong dollar, which makes commodities priced in the United States unit more expensive for buyers with weaker currencies.

Also on Tuesday, two major oil bodies gave forecasts for lower oil prices.

MSCI’s all-country world index was up 0.2 percent, while European shares closed up 0.7 percent after well-received earnings reports from companies including Henkel.

“The shift in expectation from non-OPEC production growth to declines in 2016 is mostly because of lower expected growth in Canada and larger expected declines in US onshore production”, EIA said.

From a global demand of 1.8million barrels per day (mb/pd) in 2015, IEA, in the report released on Friday, said the demand for oil would plummet to an abysmal 1.2 mb/pd by next year.

“We see global oil demand maintaining its recent healthy growth”.