Crude oil demand growth highest in 5 years
According to a recent oil market report by the International Energy Agency (or IEA), the drop in oil prices below $50 per barrel is causing a sharp increase in the demand for oil. The IEA carried out a sharp upgrade of the forecast for the growth of oil consumption.
Better response from consumers toward lower oil prices
The IEA’s report stated that global demand for oil would grow by 1.6 million bpd (barrels per day) during 2015, an upward revision of 200,000 bpd from the agency’s previous forecast.
Additionally, the IEA expects that global demand would rise by 1.4 million bpd during 2016. Consumers were reportedly responding positively to lower oil prices, and consistent macroeconomic growth contributes to this growth trend.
Rebalancing process likely to take a long time
The IEA notes that the global supply of oil is growing at a vigorous pace, outpacing consumption by 3 million bpd in 2Q15. The agency also declared that global inventories would accumulate further and that demand would not overtake the surplus until the end of 2016 at the earliest.
While lower oil prices have been favoring refiners such as Tesoro (TSO) and Valero Energy (VLO), which make up about 5.3% of the Energy Select Sector SPDR ETF (XLE), exploration and production firms such as Chesapeake Energy (CHK) and Apache Energy (APA) have been experiencing losses.