Bloomberg News

IEA Cuts 2012 Oil Demand Forecast on ‘Darkening’ Growth

February 13, 2012

(Updates with IEA’s Fyfe comment in third paragraph.)

Feb. 10 (Bloomberg) -- The International Energy Agency cut its 2012 global oil demand forecast for a sixth month as a “darkening” economic outlook reduced prospects for growth amid supply concern following sanctions on Iranian crude.

Worldwide crude consumption will increase by 800,000 barrels a day to 89.9 million barrels, from 89.1 million last year, the IEA predicted in its monthly oil market report today. That’s 300,000 less than its previous estimate. The agency cut its forecast after a “sharp deterioration” of economic growth projections by the International Monetary Fund last month to 3.3 percent from a September forecast of 4 percent.

“It’s a pretty remorseless picture of decline for oil demand throughout the OECD,” David Fyfe, head of the agency’s market and industry division, said in a telephone interview from Paris. “These are mature markets, in which industry recovery is stuttering, and moving into recession in the case of Europe.”

Consumption will drop in member nations of the Organization of Economic Cooperation and Development this year as Europe’s sovereign debt crisis slows growth, according to the IEA. Brent crude, which advanced 9.3 percent this year, dropped 1 percent following the IEA demand revision to $117.38 a barrel. Prices were lifted by a European Union ban on Iranian crude imports, which will take effect in the summer and concern that Iran will retaliate against the embargo.

‘Uneasy Balance’

“An uneasy balance characterized oil markets in January, with tensions surrounding Iran counteracting a weaker economic outlook,” the Paris-based adviser to consumer nations said. “Sanctions targeting Iran’s oil exports do not take effect until 1 July, but several European customers have already curtailed imports of Iranian crude and Asian buyers are also moving to line-up alternative supplies.”

Global oil demand will rise by 0.9 percent, the IEA estimates. The outlook is split into “robust” consumption in emerging countries, while in most advanced economies fuel use will drop, the IEA said. In developing nations, demand will increase by 2.8 percent next year, offsetting a decline of 0.8 percent in OECD members.

China’s purchases may be spurred if it decides to fill storage tanks at two strategic petroleum reserve sites, which will be completed in the first quarter, the IEA said.

OPEC Output

The Organization of Petroleum Exporting Countries, which provides about 40 percent of the world’s oil, pumped about 1 million barrels a day more in January than the average amount required from the group this year, according to the report.

OPEC’s 12 members boosted output by 80,000 barrels a day last month to a three-year high of 30.9 million a day, as Libya raised production. The organization will need to provide an average of 29.9 million barrels a day this year, just under the 30 million output target agreed at its last meeting on Dec. 14, according to the IEA.

“We’re looking at a reasonably well-supplied market for 2012,” Fyfe said. Rising production in Libya, Iraq and Angola will offset unplanned outages in Syria, Yemen, South Sudan and the North Sea, he said.

Crude output from Sudan and South Sudan is at risk at least until the end of the year because of a pipeline dispute and other issues after the countries split in July, the agency said.

Oil inventories held by companies in developed economies stayed below their five-year seasonal average for a sixth month, according to the report. Stockpiles in the OECD dropped 40.8 million barrels to 2.6 billion barrels in December. That’s equivalent to 57.2 days worth of consumption, the IEA estimates.

--Editors: Raj Rajendran, Steve Voss.

To contact the reporter on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net

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


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