IEA Cuts Global Crude Demand Forecast Amid Worsening Economy And High Prices

The International Energy Agency (IEA) has in its latest monthly Oil Market Report (OMR) trimmed its global crude oil demand forecast for 2011 and 2012 by 160,000 b/d and 200,000 b/d respectively compared to demand estimates in the last issue. In the latest OMR, released on 13 December, the agency said a combination of the worsening global economic backdrop and persistently heightened oil prices were behind the forecast reduction. It added that “uncertain prospects for the single European currency continue to provide added downside risk to current economic growth estimates.” The IEA said emerging markets will continue to outperform their OECD counterparts – a consequence of more robust economic prospects and lower underlying price elasticity. “Having risen by 1.18mn b/d in 2011, non-OECD demand growth will accelerate to 1.58mn b/d in 2012, outweighing OECD declines of 0.45mn  b/d in 2011 and 0.31mn  b/d in 2012.

Global oil product demand now averages 89.0mn b/d in 2011 (+0.73mn b/d versus 2010), rising to 90.3mn b/d in 2012 (growth of 1.26mn b/d),” the IEA said. 

Commenting on its medium term forecast, the IEA said global oil product demand is expected to be around 300,000 b/d lower over the 2012-16 period compared to the forecast released in the June Medium-Term Oil and Gas Market report. “Overall, global oil product demand rises from 88.3mn b/d in 2010 to 95.0mn b/d in 2016, equivalent to +1.2% or 1.1mn b/d per year on average,” the IEA said, adding: “Growth will derive solely from non-OECD economies, which will account for more than half of global demand as soon as 2013, with the gap broadening sharply by 2016 (50.6mn b/d versus 44.4mn b/d for the OECD).”

Regarding a global overview, the IEA said following official data submissions for September, the third quarter 2011 demand picture has become clearer. Global oil product demand increased by 360,000 b/d on a year-on-year basis, some 180,000 b/d less than the prior assumption. “This is the slowest pace of expansion since the dog days of 2009, when the global credit crunch was still in full swing, as a combination of persistently heightened prices and the clearly decelerating global economic backdrop have taken their toll.”

Global oil supply rose by 900,000 b/d to 90.0mn b/d in November from October, boosted by higher output from Saudi Arabia, Libya and non-OPEC countries, the IEA said. Compared to a year ago, global oil production was 1.3mn b/d higher, all of which came from increasing output from OPEC crude and NGLs. Non-OPEC supply rose by 300,000 b/d to 53.4mn b/d in November, most of which was due to higher production in the North Sea and North America. The IEA said compared to last year, fourth quarter 2011 production should grow by around 140,000 b/d to 53.2mn b/d. “Annual non-OPEC supply growth now averages less than 100,000 b/d for 2011, but should post a 1.0mn b/d gain in 2012,” the agency said.

In November OPEC crude oil supply rose to its highest level in more than three years, up by 620,000 b/d to 30.68mn b/d, the IEA said, adding that Saudi Arabia and Libya accounted for 80% of the monthly increase. “The ‘call on OPEC crude and stock change’ for 2012 is pegged at 30.2mn b/d, broadly in line with current OPEC output, but down 500,000 b/d from 30.7mn in 2011 due to now higher expectations for non-OPEC supplies,” the IEA said.

OECD industry oil stocks fell by 36.3mn barrels in October, to 2.630bn barrels or 57.2 days of forward cover, the IEA reported. It said that inventory levels stood below the five-year average for a fourth consecutive month, with the deficit of inventories versus the five-year range widening to 61.9mn barrels. Preliminary data suggest a counter seasonal 6.9mn barrel build in November OECD industry stocks, in contrast with the five-year average 14.9mn barrel draw, the IEA said. Meanwhile, short term floating storage fell by 6.3mn barrels from 46.0mn barrels in October to 39.7mn barrels in November. The IEA said a reduction in Iranian crude oil floating storage in the Middle East accounted for all the change, declining from 34.3mn barrels to 28.0mn barrels. It said that elsewhere, floating storage remains minimal in the face of persistent market backwardation.

IEA Supply/Demand Estimates(Mn B/D)

2010

2011

2012

Year

1Q

2Q

3Q

4Q

Year

1Q

2Q

3Q

4Q

Year

World Oil Demand

88.3

88.9

87.8

89.4

89.8

89.0

90.0

89.2

90.8

91.1

90.3

- OECD

46.2

46.3

44.5

45.9

46.1

45.7

45.9

44.3

45.5

45.8

45.4

- Non-OECD

42.1

42.6

43.3

43.5

43.7

43.3

44.0

44.9

45.2

45.3

44.9

  - Of which FSU

4.5

4.5

4.6

4.8

4.8

4.7

4.6

4.6

4.9

4.9

4.7

  - Of which China

9.1

9.5

9.5

9.3

9.6

9.5

9.9

10.1

9.9

10.1

10.0

Non-OPEC Supply

52.6

52.7

52.3

52.5

53.3

52.7

53.6

53.5

53.6

54.0

53.7

  - Of which FSU

13.5

13.6

13.6

13.5

13.7

13.6

13.8

13.8

13.6

13.8

13.8

  - Of which China

4.1

4.2

4.2

4.1

4.2

4.2

4.3

4.3

4.3

4.3

4.3

OPEC NGLs

5.4

5.7

5.7

5.8

5.9

5.8

6.2

6.2

6.5

6.6

6.4

Implied Call on OPEC Crude

30.3

30.5

29.8

31.1

30.7

30.5

30.2

29.5

30.7

30.6

30.2

Adjusted Call on OPEC Crude

29.6

30.3

29.2

30.7

30.2

30.1

29.7

29.1

30.2

30.1

29.8

Actual OPEC Crude Prod.

29.5

30.0

29.5

29.9

Supply/Demand Balance

-0.8

-0.5

-0.3

-1.2

Note:Figures may not add due to rounding.

Copyright MEES 2011.