India To Surpass China As ‘Main Engine’ Of Global Oil Demand Growth: IEA Monthly Oil Market Report

India could soon overtake China as the country with the biggest thirst for crude oil.

The South Asian nation is on track to replace China as the world’s top driver of demand growth for oil, the International Energy Agency (IEA) said Thursday in its monthly oil market report. As its population swells and economy expands, India could see growth of around 300,000 barrels of oil per day in 2016, the strongest volume increase for the country.

Those gains will help offset some of the sluggish demand for oil in China, the United States and much of Europe, the Paris-based watchdog group said. Growth in global oil demand is expected to ease to around 1.2 million barrels a day in 2016, about one-third less than 2015’s expansion of 1.8 million barrels a day.

India’s economy last year grew at an average rate of 7.5 percent, faster than the 6.9 percent growth in China, official data show. Although India has seen declines in exports, railway freight, cement production and investment, Indian economists say the nation remains a rare bright spot among emerging economies, BBC has reported. Beyond economic growth, the IEA said government reforms to India’s energy sector are also boosting the country’s appetite for oil.

India, Asia’s third-biggest economy, “could be replacing China as the main engine of global demand growth,” the IEA said. “Strong gains in India remain one of the most persistent demand supports showing that if an economy remains fundamentally robust lower oil prices can stimulate additional demand.”

The global growth in oil demand this year, while weaker than initially expected, could gradually eat away at the global oversupply of crude oil, which itself is steadily shrinking. The mismatch in supply and demand has helped push crude prices down from above $100 a barrel in 2014 to around $40 a barrel this week. Oil producers in response have canceled hundreds of billions of dollars in investments and laid off tens of thousands of workers as profits evaporate and debts balloon.

OPEC oil production slipped by 90,000 barrels a day in March to 32.47 million barrels a day following outages in Iraq, Nigeria and the United Arab Emirates, which offset gains from Iran and Angola. Supply from Saudi Arabia dipped in March but held near 10.2 million barrels a day, the IEA reported.

On a global level, oil supplies fell by 300,000 barrels a day in March to 96.1 million barrels a day, with much of the drop originating in the U.S. “There are signs that the much-anticipated slide in production of light, tight, oil in the United States is gathering pace,” the IEA said, noting that by early April, the rig count had fallen nearly 80 percent from its peak in October 2014.

The latest IEA data arrives just days ahead of the closely watched meeting of OPEC and non-OPEC producers in Doha, Qatar. Major producers from over 15 countries have agreed to discuss a deal Sunday to freeze oil production at January levels in a bid to trim the global oversupply of crude oil.

Russian energy officials this week said an agreement could be reached without the participation of Iran, a stipulation that Saudi Arabia has insisted upon from the start.

The IEA said that if the nations reach a deal to cap their output, rather than cut production, “the impact on physical oil supplies will be limited.” Even so, oil markets have responded favorably in anticipation of an agreement.

Brent was up 0.2 percent to $44.27 a barrel Thursday at 11:26 a.m. EDT. West Texas Intermediate, the U.S. benchmark, rose 0.22 percent to $41.85 a barrel.