IEA further cuts global oil demand forecast
World oil consumption will grow less quickly than expected this year and next, the International Energy Agency (IEA) said on Wednesday, as the pace of economic growth slows.
The monthly report from the IEA, an adviser to 28 industrialised countries, also added to signs that top oil exporter Saudi Arabia is trimming production now that Libyan oil is starting to return to the market.
Global fuel demand will expand by 1.25 million barrels per day (bpd) in 2012, the IEA said in a monthly report, 160,000 bpd less than previously expected. This year's growth forecast was trimmed by 50,000 bpd to 990,000 bpd.
"We're seeing indications of weaker demand in markets like the Middle East, China and the US," David Fyfe, head of the IEA's Oil Industry and Markets Division, told Reuters.
"If we are in double-dip territory, which is not our base case, we would be looking at much weaker demand growth."
The Paris-based IEA is the second closely watched oil forecaster to downgrade its global demand outlook this week, following a reduction by the Organization of the Petroleum Exporting Countries on Tuesday.
Both the IEA and OPEC now have a similar growth outlook for next year. OPEC in a monthly report on Tuesday reduced its oil demand growth forecast for 2012 by 70,000 bpd to 1.19 million bpd.
The IEA also cut its 2012 oil demand growth forecast in last month's report. It now expects the world will need to use 90.48 million bpd of fuels next year.
The last of this month's trio of oil forecasts from government agencies, the US Energy Information Administration's report, is due for release later on Wednesday.
Oil was trading near USD 112 a barrel on Wednesday, having recovered from an initial move lower after the release of the IEA report at 0800 GMT.
Prices are down around USD 15 from their 2011 high reached in April partly on concern over Europe's sovereign debt crisis and slowing global growth.
Weaker Global Growth
The IEA report incorporates the International Monetary Fund's World Economic Outlook released in September, which cut its forecast for global growth to 4.0 percent for this year and next.
Even so, stronger-than-expected demand numbers from the developed countries of the Organization for Economic Cooperation and Development (OECD), mainly Europe and the Pacific region, provided offsetting support.
Oil demand in Europe rose by 0.3 percent in August, the IEA said, although this was not expected to change the longer-term downward trend. Some of the increase may have been due to consumers filling heating oil tanks before winter.
"European oil demand is still expected to contract in 2011 and 2012, even though recent data points have been slightly stronger than expected," Fyfe said.
On the supply front, the IEA said OPEC's oil production had fallen in September by 20,000 bpd to 30.15 million bpd as lower output by Saudi Arabia and Nigeria offset the restart of supplies in Libya.
Saudi Arabia and its Gulf Arab OPEC allies raised production after failing to convince other members at a meeting in June to agree to a coordinated increase to meet the Libyan shortfall.
The IEA said calls by OPEC countries including Iran -- which opposed the increase in supplies -- for other OPEC members to cut output looked "premature" as production remains below the IEA's forecast of fourth-quarter demand for OPEC oil of 30.8 million bpd.
Oil inventories in the OECD declined by 3.4 million barrels in August to equal 58.4 days of future demand. Since July, stocks have fallen below the five-year average for the first time since June 2008, the IEA said.
The inventory trend could change as supply builds up from Libya after being shut down due to the civil war. The IEA sees Libyan output capacity rising close to 600,000 bpd by the end of 2011, up from as low as 350,000 bpd previously.
Olivier Jakob, oil analyst at Petromatrix, said he expects a further fall in Saudi output next year to prevent inventories filling up as Libyan supply recovers.
"Saudi Arabia will have to cut more in 2012 to prevent a stock build," he said. "There is no doubt that it will given that it unilaterally increased production following the shutdown of Libya."