Bloomberg News

IEA Cuts Oil Demand Forecast a Second Month on Slower Growth

October 12, 2011

(Updates with IEA official in third paragraph.)

Oct. 12 (Bloomberg) -- The International Energy Agency cut forecasts for global oil demand in 2012 for a second month as the economic recovery loses momentum.

The Paris-based adviser reduced estimates for world demand for next year by 210,000 barrels a day, to 90.5 million a day in its monthly oil market report. That means consumption will increase by 1.3 million barrels a day, or 1.4 percent, from this year. Oil inventories in industrialized nations fell below their five-year average for the first time in more than three years, according to the IEA.

“The risks lie to the downside,” David Fyfe, head of the IEA’s industry and markets division, said in an interview with Maryam Nemazee on Bloomberg Television’s “The Pulse.” There is “still robust growth but it’s being affected by this economic slowdown.”

Brent oil futures in London have lost 12 percent from this year’s peak, trading at about $111 a barrel today, as the global recovery fades and Europe’s sovereign debt crisis rattles investors. The agency sees “significant downside risks” to expectations for world economic growth in 2012, lowered last month by the International Monetary Fund to 3.9 percent.

Fragile Prospects

“Economic prospects remain fragile, particularly with the euro zone’s ongoing sovereign debt crisis,” the IEA said today. “Global oil demand has grown at a moderate, but stable pace in recent months. The picture could deteriorate, however, with a downward lurch in economic prospects,”

This year world oil demand will increase by 1 million barrels a day, or 1.1 percent, to 89.2 million a day, following a downward revision of 50,000 barrels, according to the agency.

The reductions are “just in line with everyone’s expectations,” Timothy Guinness, chief executive officer of Guinness Atkinson Asset Management in London, said in a separate interview on the same program. The “absolutely key factor in determining where the oil price will be in the next 12 to 24 months is the behavior of Saudi Arabia and their fellow Middle Eastern states.”

The Organization of Petroleum Exporting Countries will need to provide an average of 30.8 million barrels a day in the fourth quarter, according to the IEA. That’s about 300,000 a day more than the agency estimated in last month’s report. OPEC pumped 30.15 million a day in September.

Sabotage Attacks

OPEC members pumped less crude in September as Saudi Arabia cut its production from the 30-year high achieved in August and Nigeria’s output was hindered by sabotage attacks, the IEA said. Daily supply from the organization’s 12 members fell from 30.17 million in August, the agency said.

The decline was partly offset by the resumption of Libyan production, the IEA said. Libyan output averaged 75,000 barrels a day and could approach 600,000 barrels by year-end, it said.

Oil stockpiles held by companies in the OECD declined by 3.4 million barrels to 2.69 billion in August, or about 58.4 days worth of consumption, as Asian refiners boosted operating rates, according to the agency. Inventories slipped below their five-year average for the first time since June 2008, according to the report.

The IEA trimmed estimates for supplies from outside OPEC next year by 200,000 barrels a day. Non-OPEC producers such as Russia, Brazil and Canada will boost output in 2012 by 900,000 barrels a day to 53.6 million.

--Editors: Raj Rajendran, Rachel Graham.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net


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