Oil prices are heading for their third consecutive weekly loss as tensions in the Middle East and North Africa ease, but supply risks in the region for next year remain “extraordinarily high”, the International Energy Agency (IEA) warned.
Markets are “more optimistic” about future supply, the energy watchdog said in its July report on Friday, as it predicted that global demand was set to climb to 1.4 million barrels a day (mb/d) in 2015, from 1.2 million mb/d in 2014.
But it warned that geopolitical uncertainty would remain very much in focus for the year ahead.
“The global economy is still expected to gain momentum in 2015. Supply risks in the Middle East and North Africa, not least in Iraq and Libya, remain extraordinarily high,” IEA said, making its first forecasts for next year.
“The risks associated with the 2015 forecast are particularly high. Notably, geopolitical uncertainty in Iraq, Ukraine, Libya, Nigeria and Venezuela bring with them macroeconomic uncertainty.”
Oil futures climbed to a nine month high of more than $115 per barrel in June amid the Iraq crisis, but Brent prices have since fallen to around $108 dollars a barrel, as supply concerns eased.
Commodity analysts at Commerzbank said that Brent’s fall below $108 on Thursday – after nine straight days of falls, as geopolitical tensions cooled – was the longest losing streak for over four years.
“The continuing prospect of increased oil supplies from Libya in the wake of operations resuming at a major oilfield and the two biggest oil ports are a negative factor for prices,” Eugen Weinberg, head of commodity research at Commerzbank, said in a note Thursday.
“Another setback came (Wednesday) with the announcement of China’s crude oil imports. According to the customs authorities, China imported 5.67 million barrels of crude oil a day in June, almost 8 percent less than in May.”
Oil demand in 2015 will be led by the non-OECD sector, the IEA said. Demand in this region overtook the OECD’s in 2014, and it is expected to widen its lead in 2015.
“Many non‐OECD economies are entering a stage of development where rising household incomes and expanding industrial activity typically fuel relatively fast oil consumption growth,” according to the group.
Non-OPEC supply, meanwhile, is forecast to grow by 1.2 million barrels per day next year, in line with expansions in 2013 and 2014, with the U.S. and Canada set to remain the “mainstays for growth”, the agency said.