One of the great oddities in oil price forecasts and analysis in the past year has been the fascination with the supply side of the oil market, which is perhaps understandable following the relentless chaos coming out of OPEC nations. However, as we have long contended, the true wildcard is the demand side, which has been deteriorating over the past 6 months, driven primarily by a slowdown in Chinese demand, coupled with a US peak driving season which was far less exciting than many had expected.

We were glad to see the IEA finally realizing just how important the demand side also was, when in its latest report released earlier today, the Paris-based organization revealed a much more pessimistic outlook on the state of the oil market, predicting that a sharp slowdown in global oil demand growth, coupled with ballooning inventories and rising supply means the crude market will be oversupplied into late 2017. The IEA had previously expected the market to show no surplus in the second half of 2016.

 “Our forecast in this month’s report suggests that this supply-demand dynamic may not change significantly in the coming months. As a result, supply will continue to outpace demand at least through the first half of next year,” the Paris-based adviser said in its monthly report. “As for the market’s return to balance — it looks like we may have to wait a while longer.”

The IEA trimmed projections for global oil demand next year by 200,000 barrels a day to 97.3 million a day. It reduced growth estimates for this year by 100,000 barrels a day to 1.3 million a day, citing a “dramatic deceleration in China and India” this quarter coupled with “vanishing growth” in developed economies.

“Recent pillars of demand growth — China and India — are wobbling,” said the IEA, which counsels 29 nations on energy policy. “The stimulus from cheaper fuel is fading. Refiners are clearly losing their appetite for more crude oil.”