Weak economic growth and high oil prices are likely to contain global oil demand this year and cap it next year, the International Energy Agency (IEA) said yesterday.
“The pace of oil demand growth is expected to remain relatively steady over the next 18 months, with annual gains of just 0.8 million barrels per day [bpd] in both 2012 and 2013,” the agency said in its latest Oil Market Report. “This modest growth rate reflects the combined effects of sluggish global economic activity, historically elevated oil prices and global improvements in energy efficiency.”
With Brent futures indicating that prices would remain above US$100 this year before dipping to just below US$99 next year, the persistently high prices are giving consumers an incentive to cut consumption.
“This is best encapsulated by the rapid decline in global oil intensity, which is forecast to fall by 2.3 percent in 2012 and 2.5 percent in 2013, a greater decline rate than the previous 15 year average of 2.2 percent,” the agency said.
Oil intensity is a measure of the role of oil in the overall mix of energy supplies.
With the growth of the global economy expected to be merely 3.3 percent this year and 3.6 percent next year, the weak macroeconomic backdrop is also expected to cap oil demand growth, the IEA said.
Europe showed the weakest growth trend as it struggles with a public debt crisis, with demand seen declining 2.6 percent this year, the IEA said.
Asian Organisation for Economic Co-operation and Development countries are expected, on the other hand, to post growth of 3.3 percent on the back of Japanese nuclear outages.
However, a gradual recovery of nuclear capacity in Japan is expected to reduce demand for oil in Asia, leading to a decline of 1.9 percent next year, while a “more robust European economic outlook in 2013, with GDP growth of 0.8 percent,” would result in a modest decline of 1.3 percent for the region.
Meanwhile, oil output by Iran continued to fall, declining by 50,000 barrels per day to 2.85 million bpd for the whole of last month, as Western sanctions over its controversial nuclear program hurt demand.
However, its exports emerged from a trough in July, and signs show that further gains may be made this month with China, South Korea and India among to boost imports during the month.
Overall, OPEC crude supply fell by 0.1 million bpd month-on-month to 90.8 million bpd last month, with Nigeria, Angola and Iraq posting the biggest increases, while non-OPEC supply dipped 0.2 million bpd last month from a month ago.
OPEC predicted on Tuesday that world oil demand would reach 88.74 million bpd this year, up from the previous estimate of 88.72 million bpd, and higher than 87.89 million bpd last year.