London: World oil demand will be lower than expected this year and next as economic slowdown and high prices curb consumption, the International Energy Agency (IEA) said on Thursday.
The agency, which advises industrialized countries on energy policy, said oil prices had been stubbornly high, helping restrain fuel use in the United States, China and Japan in the and this trend could intensify if economic activity slowed.
“The demand picture could sour significantly should economic prospects falter,” the IEA said in its monthly market report.
The IEA cut its forecast for world oil demand this year by 70,000 barrels per day (bpd) to 89.16 million bpd, and reduced its 2012 demand projection by 20,000 bpd to 90.47 million bpd.
This brought the agency’s forecast for global oil demand growth in 2011 down by 90,000 bpd, but increased its estimate of expected 2012 oil demand growth by 50,000 bpd.
Oil prices have been historically strong this year, with North Sea Brent averaging more than $100 per barrel, and this has helped keep a lid on consumption in many major economies.
Brent crude oil futures were trading around $113 at 1100 GMT on Thursday, compared with below $90 a year ago.
Despite the warnings on the outlook for demand, the IEA suggested the oil market could stay strong for some time with demand for oil from the Organization of the Petroleum Exporting Countries (OPEC) running above output.
“Relatively robust forecast”
OPEC oil output rose 95,000 bpd in October to 30.01 million bpd, the IEA said, with more oil from Saudi Arabia, Angola and Libya. But demand for OPEC oil and stocks was projected at around 30.5 million bpd this year, slipping only slightly to about 30.4 million bpd in 2012 as non-OPEC supplies increased.
Harry Tchilinguirian, head of commodity market strategy at BNP Paribas, said the IEA report suggested the oil market could strengthen if the northern hemisphere winter was particularly severe.
“It is a relatively robust forecast,” Tchilinguirian said.
“The fundamental position at the end of the year could be much tighter. From a fundamental perspective, this suggests possible support for prices this winter.”
Libyan oil production had recovered far faster than expected following the overthrow of former dictator Muammar Gaddafi and was now around 530,000 bpd, the IEA said.
The reactivation of Libyan oil facilities had been impressive, it said, saying damage to infrastructure had been less than feared.
It projected Libyan oil output would reach 1.17 million bpd by the fourth quarter of 2012, 90,000 bpd more than previously forecast. This would still be well below Libyan output levels before the start of the country’s civil war of 1.6 million bpd.
The IEA was less optimistic than the Libyan government, which said on Thursday it expected to return to pre-conflict oil output levels by June of next year.
Industry stocks of oil in the major industrialized countries had fallen by 11.8 million barrels in September to the equivalent of 57.9 days of future demand, the IEA said, but it noted that these stocks were still around 1.5 days above the five-year average.