IEA cuts oil demand forecast due to prices, economic outlook
In its latest monthly oil market report, the International Energy Agency revised downward its forecast for 2011 global oil product demand growth as a result of persistent high prices and weaker projections for economic growth in the developed countries of the Organization for Economic Cooperation and Development.
By OGJ editors
HOUSTON, May 12 -- In its latest monthly oil market report, the International Energy Agency revised downward its forecast for 2011 global oil product demand growth as a result of persistent high prices and weaker projections for economic growth in the developed countries of the Organization for Economic Cooperation and Development.
With a new forecast from the International Monetary Fund putting 2011 economic growth in the world’s advanced economies at 4.3% vs. 4.8% growth in 2010, IEA now projects that global oil demand will climb 1.3 million b/d this year to average 89.2 million b/d. In 2010, worldwide oil demand grew by 2.8 million b/d.
A month ago, IEA’s forecast put 2011 global oil demand growth at 1.4 million b/d.
IEA noted that $4/gal gasoline is likely to yield an anemic US driving season and that a weaker 2011 profile in North America is the main driver behind the change to its demand forecast. Also, governments in Russia, Brazil, and China face difficulties fully passing on recent price rises to consumers, helping to sustain robust demand growth in the non‐OECD countries, and potential power supply problems in China might augment that trend, the report said.
Global oil supply dipped by 50,000 b/d in April to 87.5 million b/d, according to the report.
Oil supply from the Organization of Petroleum Exporting Countries continued its downward trend in April, with Libyan supply shuttered in the wake of worsening civil war. April OPEC output averaged 28.75 million b/d, off by 235,000 b/d from March and 1.3 million b/d below January levels, according to the report.
As OPEC ministers are scheduled to meet in a month, IEA noted that most analysts believe that a change in prevailing production allocations is unlikely.
In Libya, political and military stalemate lead IEA to assume that supply from the North African country will remain absent from the market for the rest of 2011. Production has also been curtailed by political unrest in Yemen, where about 100,000 b/d has been offline following sabotage to a key crude pipeline in mid-March. More recently, an oil workers’ strike shut in another 70,000 b/d, though the result is not captured in this month’s outlook, IEA said.
Non-OPEC production rose by 200,000 b/d in April to 53 million b/d. Baseline data changes to non‐OPEC output raised average 2010 supply by 100,000 b/d to 52.9 million b/d. Meanwhile, 2011 non-OPEC supply estimates are adjusted down by 1 million b/d to 53.7 million b/d, implying annual growth of 800,000 b/d, as lower supplies in North America, the former Soviet Union, and Africa are only partly offset by a higher baseline of supply from Thailand and a more robust outlook for Norway. Annual non-OPEC growth in 2011 is therefore slightly reduced to 750,000 b/d compared to projected growth of 870,000 b/d in last month’s IEA report.
IEA said its projections suppress the pace of recovery in potential OECD refinery throughputs to reflect recent weak margins and stubbornly low recent run rates, but new non-OECD downstream capacity is likely to ensure a boost during this year’s third quarter.
Global crude runs tend to rise by about 1.6 million b/d between the second and third quarters, with this year’s increases potentially amounting to a stronger 2.3 million b/d, IEA said. Less than half of that can be met via higher non‐OPEC supply.
“Some OPEC members might be happy with the OECD inventory profile that unchanged production on their part would bring about. But it’s unlikely to result in the market stability both producers and consumers profess to seek,” IEA said.
OECD industry stocks declined in March by 9.2 million bbl to 2,643 million bbl, or 58.8 days cover, as seasonal refinery maintenance substantially reduced product stocks, IEA reported. Preliminary April data indicate a 29.9 million bbl increase in commercial OECD inventories, while oil held in short-term floating storage declined.