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Non-Opec growth to outpace improving demand

The International Energy Agency says the trend is likely to continue into the new year

The weak demand and strong supply trends that have fuelled the oil price decline in recent months are likely to continue into the first half of next year, according to the International Energy Agency (IEA).

Demand growth in 2014 is expected to be the lowest in five years at just 680,000 barrels a day (b/d), the IEA says, thanks to weak demand growth in China and absolute declines from Europe. Total demand is forecast at 92.4 million b/d.

However, the demand picture appears to have improved in the second half of the year. Demand rose to 93.1m b/d in the third quarter, about 600,000 b/d higher than 2013, compared second-quarter growth of just 300,000 b/d. China helped to boost demand, though the increased consumption appeared to come as much from strategic stockpiling as any underlying improvement in economic performance. Brazil, Germany and Russia also helped to lift demand. 

The IEA expects demand growth to continue to gather pace in 2015, thanks to an improved global economic outlook. The agency expects demand to grow by 1.1m b/d, or 1.2%, to 93.6m b/d in 2015. 

Meanwhile, production growth outside Opec has continued at record rates. The IEA said that non-Opec production had risen by 2 million b/d over the first 10 months of 2014, led primarily by the US and Canada, more than offsetting a small decline in Opec output.

Although the IEA reckons non-Opec growth has peaked, it expects it to continue to grow by more than 1m b/d into early 2015, a much faster rate than previous years. It argues that even if US shale producers cut spending, improved efficiency and technologies will allow them to continue to raise output.  

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