London: World oil consumption will increase at a slower rate than expected this year and next as the pace of global economic growth declines, the International Energy Agency (IEA) said on Tuesday.
In its monthly oil market report, the Paris-based agency said financial and economic headwinds were gathering momentum and significant economic threats skewed the overall demand side risk to the downside.
David Fyfe, head of the IEA’s oil industry and markets division, said the oil market had been tight in recent months but the balance could ease if there were no further disruptions to supply.
“It is possible that we could see an easing in the tightness of the market in the months ahead,” Fyfe said.
Oil prices fell after publication of the IEA report, with Brent crude oil futures for October slipping by around 50 cents to a low of $111.92 before recovering to trade around $112.20 by 0900 GMT.
The IEA cut its estimate of global oil demand growth this year by 160,000 barrels per day (bpd) to 1.04 million bpd and trimmed its 2012 demand growth estimate by 190,000 bpd to 1.42 million bpd.
Oil supplies, meanwhile, should get a significant boost from the gradual return of Libyan oil to the market after more than six months of civil war following the uprising against Muammar Gaddafi.
Libya’s Arabian Gulf Oil Company said on Tuesday production from the eastern oilfield of Sarir had reached 160,000 bpd and it had started to send crude to the export terminal of Tobruk.
Libyan oil production capacity could reach 350,000 bpd to 400,000 bpd by the end of this year and 1.1 million bpd by the last quarter of 2012, the IEA said. The agency raised its estimate of average Libyan oil output capacity during the fourth quarter of this year by 100,000 bpd to 300,000 bpd.
But Fyfe said the IEA was still cautious in predicting how fast Libyan oil output could recover.
“We are using a fairly conservative assumption for Libya,” Fyfe told Reuters Insider television in an interview.
“Until we see a resolution of the security situation on the ground (in Libya), we would prefer to be cautious on the resumption of oil supplies.”
The agency, which advises 28 industralised countries on energy policy, now sees world oil demand rising to 89.28 million bpd this year, increasing to 90.69 million bpd in 2012.
The Organization of the Petroleum Exporting Countries and the US Department of Energy have also both cut their forecasts for global oil demand growth this month.
The IEA said Opec oil production had increased in August by 165,000 bpd to 30.26 million bpd. This was slightly below the IEA’s forecast for fourth-quarter demand for OPEC oil, which it estimated at 30.5 million bpd, down 200,000 bpd from its previous report.
Extra global supply helped increase oil inventories in the industrialised economies by 10.8 million barrels in July to almost 2.69 million barrels, or the equivalent of 58.4 days of forward demand.
But these oil stocks were built more slowly than usual for the time of year, and overall oil stock levels slipped below the five-year average for the first time since the economic recession of 2008.