“Exceptionally” mild temperatures in the early part of the winter in Japan, Europe and the US, coupled with weak economic sentiment in China, Brazil, Russia and other commodity-dependent economies, saw global oil demand growth flip from a near five-year high in the third quarter of 2015, at 2.1-million barrels a day, to a one-year low in the fourth quarter of one-million barrels a day, the International Energy Agency (IEA) Oil Market Report (OMR) for January has shown.
Persistent oversupply, bloated inventories and a slew of negative economic news pressured oil prices to 12-year lows in mid-January, with demand growth likely to moderate to 1.2-million barrels a day, it added.
Global oil supplies expanded by 2.6-million barrels a day last year, following hefty gains of 2.4-million barrels a day in 2014.
By last December, however, growth had eased to 600 000 barrels a day, with lower production from non-Organisation of the Petroleum Exporting Countries (Opec) pegged at below year-earlier levels for the first time since September 2012.
Opec crude output eased by 90 000 barrels a day in December to a still-lofty 32.28-million barrels a day, including newly rejoined Indonesia.
“Iran, now relieved of sanctions, insists it will boost output by an immediate 500 000 barrels a day. Our assessment is that around 300 000 barrels a day of additional crude could be flowing to world markets by the end of the current quarter,” the report read.
Global inventories rose by a “notional” one-billion barrels in 2014/15, with the fundamentals suggesting a further build of 285-million barrels over the course of this year.
“Despite significant capacity expansions in 2016, this stock build will put storage infrastructure under pressure and could see floating storage become profitable.
“Global refinery runs averaged 79.5-million barrels a day in the fourth quarter of 2015, down 300 000 barrels a day from the estimate in last month’s OMR owing to lower-than-expected throughputs in non-OECD Asia, except China, and a very high maintenance schedule in October,” it noted.
Global refinery margins, meanwhile, weakened in December, as middle distillate cracks fell and overwhelmed the resilience of gasoline and naphtha.