Oil Prices Rally, But IEA Sees High Prices And Weak Economy Undermining Demand

Benchmark oil prices rallied last week, due to a combination of improving US economic data and expectations of financial stimulus in the Eurozone, against a background of the deteriorating political situation in Syria and Iran�s standoff with the West over its nuclear program. Prices received a further boost on 7 August from reports of record low North Sea loadings. The rally stalled as investors took profits, despite weekly US Energy Information Administration (EIA) data on 8 August showing a larger than expected draw on inventories. However, the International Energy Agency (IEA) sees persistently high oil prices and a weak global economy undermining oil demand. The agency�s latest monthly Oil Market Report , published as MEES went to press on 10 August, says: �Sluggish economic growth could restrict annual oil demand growth to 900,000 b/d in 2012 and 800,000 b/d in 2013.�

In its Weekly Petroleum Status Report of 8 August, the EIA said that US commercial crude oil inventories decreased by 3.7mn barrels in the week ending 3 August. Gasoline inventories decreased by 1.8mn barrels, while distillate inventories decreased by 700,000 barrels. US refinery inputs averaged 15.6mn b/d, which was 36,000 b/d above the previous week�s average. US crude oil imports averaged 8.6mn b/d, up by 221,000 b/d. Over the previous four weeks, crude oil imports averaged 8.9mn b/d, down by 453,000 b/d on the same period last year. Total products supplied over the previous four-week period averaged 18.9mn b/d, down by 1.9% compared to the same period last year. Gasoline supply was 4.2% lower at 8.7mn b/d, while distillate supply was 2.8% lower at 3.6mn b/d.

Settlement Prices For Benchmark Crudes ($/B)

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