London: Oil demand growth would almost stall next year if the global economy were to experience another slowdown, the West’s energy watchdog said on Wednesday.
The International Energy Agency, adviser to industrialised nations on energy policy, said that although it had not made big changes to its oil demand growth estimates for 2011 or 2012, its predictions were now very dependent on how the global economy performed in the months to come.
“Recognising emerging economic storm clouds, we also run a lower, 3% global GDP growth scenario, which more than halves base case 2012 oil demand growth to only 600,000 barrels per day,” the agency said in a monthly report.
The IEA is the last of the three top oil forecasters to publish its estimates this month.
On Tuesday, oil producing group Opec and the US government’s energy agency, the Energy Information Administration, both slashed their oil demand growth estimates on the back of worsening economic outlook.
The reports come as grim economic news and Europe’s and US debt struggles stoked fears of another global downturn, with oil prices falling around 15% over the past week in a sharp worldwide flight from risk.
The figure of 600,000 bpd would be only a fraction of IEA’s current estimates for 2012 oil demand growth based on global GDP growth assumptions of 4.2-4.4% for 2011-2012.
“That said, our global 2011/2012 GDP growth assumption in excess of 4% might seem optimistic in the present climate,” it added.
“The sensitivity of the emerging markets to income is very strong indeed and therefore you would be looking at quite a different market dynamic if we were at 3% instead of, say 4.5% GDP growth next year,” David Fyfe, head of oil industry and markets division of the IEA, told Reuters.
Based on current global economic forecasts, the IEA trimmed its 2011 global oil demand growth by just 60,000 barrels per day (bpd) to 1.2 million bpd, reflecting recent high oil prices and slower economic growth.
It raised its 2012 global oil demand growth forecast by 70,000 bpd to 1.61 million bpd, partly due to Japan’s higher oil-fired power needs.
The IEA said OPEC’s output inched higher in July to 30.05 million bpd, close to pre-Libyan crisis levels.
It added that Opec’s spare capacity had shrunk to 3.3 million bpd, a level it described as “fairly meagre in comparison to the totality of currently perceived supply-side risks”.