The slowing global recovery will result in a lower global demand for oil this year and next, the International Energy Agency said Friday, citing slowdowns in China and the United States in particular.
“Sluggish economic growth could restrict annual oil demand growth to 0.9 million barrels per day in 2012 and 0.8 mbpd in 2013, with demand averaging 89.6 mbpd and 90.5 mbpd,” down from last month’s estimates of 89.9 mbpd and 90.9 mbpd, respectively, the IEA said in its August Oil Market Report.
The IEA, the energy watchdog for 28 industrialised countries including Ireland, said slower demand in the United States and China, which together account for a third of the global market, together with technical changes in its calculations, result ed in a cut its 2012 forecast by 0.25 mbpd.
The agency cut its 2013 economic growth forecast to 3.6% from 3.8% but left its 2012 estimate unchanged at 3.3%.
The IEA said that global oil stocks have built solidly in the first half of 2012, albeit the recent trend in OECD countries has been downward.
Combined with still-slim OPEC spare capacity, and a series of geopolitical issues confronting several OPEC producers, not least Iran, this has kept crude prices strong through July and early-August.
Consumers appear to have slashed imports of Iranian oil to only around 1m barrels per day (mb/d) in July, but the report suggests that this may prove a low-water mark if constraints on shipping Iranian oil ease in the months ahead.
Highlights of the latest OMR
Sluggish economic growth could restrict annual oil demand growth to 0.9 mb/d in 2012 and 0.8 mb/d in 2013, with demand averaging 89.6 mb/d and 90.5 mb/d respectively.
Baseline revisions for the FSU (former Soviet Union), China and Middle East lower absolute demand by 0.3 mb/d for 2011/2012 and, combined with weaker economic growth assumptions, trim the 2013 demand total by 0.4 mb/d.
Global oil supply grew by 0.3 mb/d m-o-m to 90.7 mb/d in July, with non-OPEC generating 60% of the increase. Global oil output stood 2.6 mb/d above year-ago, with 80% of the increase from OPEC crude and NGLs. Summer maintenance reduced 2Q12 non-OPEC growth to 0.5 mb/d, but output should grow by 0.7 mb/d in 2013.
OPEC crude supply fell 70 kb/d to 31.39 mb/d in July versus June, on declines from Iran, Angola and Libya. Effective spare capacity is assessed at 2.57 mb/d, and July crude imports from Iran fell to 1.0 mb/d. The ‘call on OPEC crude and stock change’ is now 31 mb/d for 3Q12 and averages 30.1 mb/d for 4Q12-4Q13.
Oil prices advanced in July and early August, extending earlier gains. Urals, a substitute for Iranian crude in Europe, led the rally in spot markets as the EU embargo on Iranian oil took effect. Brent and WTI futures surged past $112/bbl and $93/bbl, respectively, in early August, from $89.61/bbl and $78.10/bbl in late June.
June OECD industry oil stocks fell counter-seasonally by 5.5 mb to 2683 mb, or 57.8 days of forward cover. A crude stock build failed to offset a draw in products. The deficit to the five-year average stock level widened to 19.2 mb. July preliminary data suggest a 10.0 mb build in OECD stocks.
Global refinery crude run estimates for 3Q12 have been lowered by 0.3 mb/d since last month, following a slowdown in apparent Chinese oil demand and refinery operations, and outages in the US and Japan. 3Q12 global throughputs now total 75.5 mb/d, 0.2 mb/d above a year earlier and 1.1 mb/d above the 2Q12 seasonal low.