Global oil demand is proving slower than expected this year because of lower-than-forecast demand growth rates in China and the US, the International Energy Agency (IEA) said yesterday.
The IEA revised down its forecast for global oil demand growth this year by 200,000 barrels per day (bpd) to 1.58 million bpd, 1.9 percent.
The reduced demand forecast in the IEA's monthly oil market report comes with benchmark US oil at record highs of more than US$61 a barrel.
"We are seeing some price effect on demand and we have allowed for that in our forecasts, but oil is at US$60 so that is not to say we won't see a more significant price effect on demand further ahead," said Lawrence Eagles, head of the IEA's oil market division.
A slowdown in China's oil demand growth is the major factor behind lower global forecasts.
The IEA revised down its projection for China demand growth by 100,000 bpd to 360,000 bpd, 5.5 percent.
"China's price restrictions on transport fuels and power are making it uneconomic for domestic refiners and utilities to maximize output, therefore inhibiting demand," the report said.
The IEA report said the China forecast assumed a rebound in growth in the second half of the year to 9.4 percent, after a 1 percent fall in the second quarter and 4.3 percent growth in the first quarter.
Eagles said it was "fair to say" that there was a downside risk for the IEA's second half the year China forecast.
For next year, the IEA said growth in oil consumption for China was expected to rise by 7.2 percent, adding 490,000 bpd of demand.
In its first forecast for next year, the IEA also said it sees world demand increasing by 1.75 million bpd, a 2.1-percent growth rate, to 85.62 million bpd.
That is slightly faster than the 1.9 percent forecast for this year but down from last year's 3.6 percent growth when demand rose by 2.9 million bpd.
Oil consumers may see better news next year on the supply side.
The IEA said oil supply from non-OPEC nations was set to accelerate next year, and combined with growth in OPEC gas liquids output, would match world oil demand growth. It said non-OPEC output was expected to rise by 1.4 million bpd to 52.4 million bpd, after growth of 900,000 bpd this year.
In addition, OPEC is expected to add 300,000 bpd of gas liquids.
The net result for OPEC, it said, would be a call on OPEC crude for next year unchanged from this year, at 28.1 million bpd, much lower than its latest estimate for OPEC crude supply, for last month, of 29.3 million bpd last month.
Short-term, the IEA says OPEC supply should be able to cope with peak fourth quarter demand.
The agency revised down its call on OPEC crude for the fourth quarter by 600,000 bpd to 29 million, slightly under current OPEC supply. That would allow OPEC to supply world oil needs without the market needing to draw down crude stocks.
Oil prices have also found support from low spare global crude production capacity and refining capacity.
"Current prices suggest that the strategy of offsetting lower spare capacity with stocks has not yet run its course," it said.
Meanwhile, crude futures rose back near US$61 a barrel yesterday as Tropical Storm Emily churned toward storm-battered Gulf of Mexico oil platforms, escalating concerns over supply disruptions ahead of production for winter.
Holding prices back a bit was the IEA report.
Light, sweet crude for next month delivery gained US$0.29 to US$60.91 a barrel on the New York Mercantile Exchange. Nymex crude hit an all-time high of US$62.10 a barrel on July 7.
On London's International Petroleum Exchange, August Brent rose US$0.43 to US$59.25 a barrel.
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