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Supplies rise in face of plunging oil price

Crude production continues to rise and demand remains tepid in spite of the falling oil price, according to figures from the IEA.

On the supply side, output is rising even as oil companies slash their exploration and production budgets, delay projects and slow drilling.

In December, global output rose by 155,000 barrels a day (b/d) on November’s figures, with Opec and Non-Opec countries both contributing to the rise, according to International Energy Agency (IEA) figures. Production was 2.1 million b/d higher than a year ago.

Libyan output was hit by a resurgence of violence in the country, but surging Iraqi production more than offset the decline, leading Opec supplies to rise by 80,000 b/d in December. Rising US shale oil supplies made up for declines across many other parts of the world non-Opec production increased by 70,000 b/d.

However, sinking oil prices led the IEA to cut its production forecast for 2015, with declines seen coming in the second half of the year. Non-Opec supplies are now seen growing by 950,000 b/d, compared to 1.9m b/d last year, led once again by the US. The IEA expects Colombian production to be hit particularly hard, with output seen falling by 175,000 b/d.

On the demand side, 2014 consumption growth was its slowest in five years as a sharp slowdown in Chinese demand weighed on global consumption. Global oil production demand was 92.4m b/d in 2014, just 620,000 b/d, or 0.7%, higher than the previous year.

Deflationary pressure in Europe and Japan, reduced subsidies and higher taxes at the pump in many places, as well as a strong dollar have all stymied an expected spur in demand from low oil prices, the IEA said. The US has been the exception. Strong economic growth and consumers taking advantage of lower oil prices led to a 1.6% rise in demand in the last quarter of 2014 compared to the previous year.

The IEA expects global demand to grow by a modest 910,000 b/d, or 1%, in 2015 to 93.4m b/d.

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