RIYADH: Three major global agencies, representing their specific stakeholders, all seem to be agreeing on one count – non-Opec output is set to fall.

Yet, the timing of the eventuality continues to divide the International Energy Agency (IEA), Energy Information Administration (EIA) and the Organisation of the Petroleum Exporting Countries (Opec).

Exceptionally mild temperatures in the early part of the winter in Japan, Europe and the United States, alongside 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 last year, at 2.1 million barrels per day (bpd) to a one-year low in Q4-2015 of 1.0 million bpd, the January Oil Market Report from the IEA underlined.

The outlook for 2016 too projects demand growth moderating to 1.2m bpd.

However, there was a silver lining in the report too. The growth in global supply had eased to 0.6m bpd. Opec crude output eased by 90,000 bpd in December to 32.28m bpd, including newly rejoined Indonesia, the MOR insisted. And though Iran, now relieved of sanction, insists it will boost output by an immediate 500,000 bpd; the IEA expects it to be around 300,000 bpd by the end of this quarter (Q1-2016).

EIA, the statistical arm of the US Department of Energy appears more pessimistic. The global market likely won’t pull away from the supply side until at least 2017, Adam Sieminski, the head of the EIA told US lawmakers last month.

“Inventories are forecast to continue rising in 2016, before the global oil market becomes more balanced in 2017,” Sieminski added.

The first draw of global inventories isn’t expected until the third quarter of 2017 which would mark 15 straight quarters of a build, Sieminski asserted, as the US oil production was expected to drop off steadily though most of 2017.

However, Opec is sounding more positive. The market will start to re-balance itself this year as weak prices take their toll on non-Opec output. “After seven straight years of phenomenal non-Opec supply growth, often greater than 2m barrels a day, 2016 is set to see output decline as the effects of deep capex cuts start to feed through,” Opec underlined in its January monthly oil report.

Opec hence projects non-Opec output to fall by almost 700,000 barrels a day bpd in 2016.

The US is expected to see the biggest decline in production, with output forecasted to drop by 380,000 bpd in 2016 from nearly 13.5m bpd.

Other areas that Opec sees as “particularly vulnerable” because of dramatically reduced capital expenditure are parts of Asia, as well as Canada, Latin America and the North Sea.

And though Opec output is still at elevated levels, yet there are hints of drops. Secondary sources are reporting that Opec output declined by 200,000 bpd in December. The group’s output — including newly reinstated member Indonesia — fell to 32.2m bpd in December led by lower production in Nigeria, Saudi Arabia and Iraq.

In view of the changing scenario, Opec expects the call on its crude to rise by 1.7m bpd to 31.6m bpd by this year. In 2015, as per Opec, the demand for its crude averaged 29.9m bpd.

Taking a longer view of the market scenario, chairman, Saudi Aramco, Khalid al-Falih believes the next five years will be critical for the crude oil markets as supply and demand will ultimately balance at a “moderate” price.

“Demand will grow, as it has already started in 2015, and there will be a period not far into the future [when] demand will catch up with supply,” he said, while speaking in Riyadh.

Yet, headwinds continue to prick sentiments. Global economy is not in a good state. On the heels of the World Bank revising global economic growth down to 2.9pc in 2016, the IMF too has cut its own forecast for 2016 to 3.4pc.

Deeper-than-expected contraction in countries such as Brazil and the headwinds to the US economy provided by a stronger dollar, continue to be worrying signs for the overall health of the global economy. With global economy knocking on the doors of recession, as some insist, environmental threats continue to hover over the energy industry too.

Published in Dawn, February 7th, 2016