Slippery road ahead for oil: IEA

LONDON - World oil demand will keep rising as the economy expands but the increase in fuel consumption will be lower in 2011 than 2010 and demand could be a lot weaker if global growth slows, the International Energy Agency, or IEA, said on Friday.

By Christopher Johnson (Reuters)

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Published: Sun 12 Sep 2010, 12:04 AM

Last updated: Mon 6 Apr 2015, 11:48 AM

Highlighting near record industry oil IEA said in its monthly oil market report global oil supply was more than sufficient to meet current and expected demand over the next year.

“By any measure we have a very well supplied market,” said David Fyfe, head of the IEA’s oil industry and markets division.

“There is a significant cushion of oil supply to cope with unforeseen changes and the risks are very much to the downside.”

“If the world economy slows, oil demand could be quite a bit lower,” he added.

The IEA, which advises major industrial countries on energy policy, said global oil demand would average around 86.62 million barrels per day, or bpd in 2010, almost a 1.9 million bpd increase year-on-year, which was 40,000 bpd higher than previously estimated.

In 2011, consumption is forecast to rise to 87.89 million bpd, up almost 1.3 million bpd year-on-year.

It said demand growth next year would be 50,000 bpd lower than last month’s estimate.

Near record stocks

The IEA raised its estimate of 2010 demand for crude oil from the Organisation of the Petroleum Exporting Countries by around 100,000 bpd to 28.9 million bpd, saying consumption had risen a little in many areas including several developed economies and in the Asia-Pacific region.

But oil stocks were at very high levels.

Oil stocks in the developed economies of the Organisation for Economic Cooperation and Development, or OECD, had risen to the equivalent of 61.4 days of forward demand by the end of July, from 61.0 days at the end of June.

OECD industry stocks rose 19.0 million barrels to 2.785 billion barrels in July to near record high levels recorded in 1998, it said.

Preliminary data suggested there had been another build in OECD oil stocks in August, Fyfe said.

David Hufton, managing director of oil brokers PVM Oil Associates in London, said the overall tone of the IEA report sounded pessimistic.

“The evidence is building that supply exceeds demand,” Hufton said.

Oil prices have been relatively stable over the last year, mostly trading between $70 and $80 per barrel.

Fyfe said the IEA was assuming a fairly optimistic outlook for global economic growth in its oil market forecasts but that the picture could worsen if world growth was less than expected.

“If we really got quite a marked slowdown in the global economy, let us say with economic growth closer to three per cent than 4.5 per cent over the next 18 months, it could knock around one million bpd or so off next year’s oil demand,” he said.

The IEA said Opec crude oil production fell slightly in August, down by 60,000 bpd to 29.15 million bpd, and production from the 11 Opec members with output targets, all except Iraq, averaged 26.83 million bpd last month.

Relative to its targeted production cuts, Opec compliance rates were unchanged at 53 per cent in August, it said.

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