Oil demand to grow at slowest rate in 5 years
International Energy Agency says weakening economic growth will hit demand as a glut of crude sees prices plunge to a four-year low
Oil demand will expand at the slowest pace since 2009 this year as global economic growth weakens, the International Energy Agency (IEA) said. It also cut its estimates for 2015.
Oil consumption will increase by about 650,000 barrels a day this year, the Paris-based agency said in its monthly market report yesterday. The reduction of 250,000 barrels a day from a previous estimate is the fourth in a row and means growth will be about half what it anticipated in June. Crude prices have plunged to a four-year low amid a glut.
"The sell-off is putting a spotlight on weaker-than- expected demand as a leading factor behind the drops," said the IEA, which advises 29 nations on energy policy. A "staggering" increase in supply has also weakened prices.
Brent futures have plunged 20 per cent this year, sinking below US$90 a barrel last week amid speculation that oil cartel Opec will refrain from supply curbs needed to tackle a glut caused by muted demand, booming US shale output and the return of production from Libya.
Global fuel use will rise by 0.7 per cent this year to 92.4 million barrels a day, the agency said. It cut 2015 demand estimates by about 300,000 barrels a day. Consumption will nonetheless accelerate next year, rising by 1.1 million barrels a day, or 1.2 per cent, to an average 93.5 million a day.
The reduced outlook for global demand means that less crude will be needed from Opec than previously estimated, the agency said. This call on Opec was cut by 200,000 barrels a day for both 2014 and 2015.
The group responsible for 40 per cent of global oil supplies will need to provide an average of 28.8 million barrels a day in the first quarter of 2015. That is about 1.9 million a day less than the 30.66 million its 12 members pumped in September, when output rose to a 13-month high amid a recovery in Libyan output, according to the IEA. Opec will need to pump an average of 29.3 million a day in 2015.
Saudi Arabia, the group's biggest member, has "appeared determined to defend its market share" in Asia, even at the expense of lower prices, the agency said. The country extended discounts for its customers on October 1.
The IEA's demand revisions follow a less optimistic outlook from the International Monetary Fund, which on October 7 reduced forecasts for global economic growth in 2015 to 3.8 per cent, from a July projection of 4 per cent. Prices have not yet fallen sufficiently to stimulate demand or provoke producers into curbing supply, the agency said.
While the strain on revenues from oil's drop may encourage some producers to "lower output targets", such countries "are not signaling an imminent cut," the IEA said. Opec is next due to meet to review its target on November 27. Most US shale output would remain profitable even if Brent dropped to US$80 a barrel, according to the agency.
A 2.8 million barrel-a-day surge in global supply in September may "turn out to be a high-water mark", the agency said, as output is set to slow in the former Soviet Union and China.
