| Weak global economy to dent oil demand |
LONDON Oil demand will rise more slowly than expected next year as economic growth falters, pushing up stockpiles of fuel worldwide and offering some relief to consumers facing high prices.
The West’s energy watchdog, the International Energy Agency (IEA), said on Friday it had cut its estimates of oil use worldwide for several years, trimming its 2013 demand forecast by 400,000 barrels per day (bpd) in the light of a “worrying slowdown” in global economic activity.
“Lower economic growth is feeding through to slower oil demand all round,” said David Fyfe, head of the IEA’s markets division. “Global inventories have risen, and the oil market looks comfortably supplied.”
The IEA’s monthly market report on Friday echoed pessimistic forecasts this week by the US government and the Organisation of the Petroleum Exporting Countries (Opec).
The three top energy market forecasters all say output of crude oil has exceeded demand by a wide margin in the first half of this year, filling up stocks of oil and offering a sizeable cushion to cope with any unexpected shock to supplies.
This should help balance the impact on oil prices of political tensions such as the stand-off between the West and Iran over Teheran’s nuclear programme.
“The significant stock builds that occurred in the first half of 2012 will help relieve global oil markets in the second half,” the U.S. government’s Energy Information (EIA)Administration said. The EIA expects oil inventories in the developed industrialised economies to rise to 2.62 billion barrels, or 57 days of forward cover by the end of this year, “which is among the highest end-of-year levels in the last decade because of the decline in OECD consumption”.
Opec says it has been pumping more than 2 million bpd more oil than needed for the last few months, filling up tanks worldwide.
The producers’ group said in its report that economic slowdown could depress oil demand growth further. “The gloomy picture could reduce the world oil demand growth forecast by 20 per cent next year,” Opec said.
David Hufton, MD of brokers PVM in London, reflected a bearish market response to the outlook for Opec oil producers: “If this were a company reporting, it is not a report that would lift its share price.” However, security of supply is still a nagging worry.
“The geopolitical dimension is likely to continue to provide something of a floor for prices. The issue of Iran will likely continue to weigh heavy on the market through the second half of 2012,” the IEA said. “Moreover, there is a risk that recent progress in restoring output from Libya, Iraq and Nigeria could be jeopardised if recent political and civil tensions worsen.”
Agencies
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