IEA cuts oil demand forecast for 2012

The Paris-based International Energy Agency (IEA) released its monthly oil market report on 18 January, reducing its 2012 global oil demand forecast, on the back of weak consumption at the end of 2011 and warns it may cut its estimates again.

Global crude consumption is expected to grow by 1.1 million barrels a day (b/d) or 1.2 per cent in 2012 to 90 million b/d, some 200,000 less than previously estimated, according to the report.

Demand from the countries of the Organisation for Economic Co-operation and Development (OECD) will shrink by 300,000 b/d.  Developing economies meanwhile will grow by only 1.4 million b/d. China, the world’s second largest oil consumer is expected to grow by only 4.3 per cent, rather than the 5.2 per cent forecast just a month ago.

The forecast was cut following “Clear signs of economic weakness” which tipped global oil demand into a “declining year-on-year trend at the end of 2011, down 0.3 million b/d in the fourth quarter of  2011,” says the report. This is in addition to high oil prices.

European benchmark crude oil prices stood at $110.81 a barrel on 18 January. The twelve-crude basket from oil producer group, Opec also traded at $11.78 a barrel.

Opec’s output in December rose by 240,000 b/d to 30.89 million b/d, the highest in more than three years, due to the rapid recovery in supplies from Libya, and to a lesser extent increases from Saudi Arabia and the UAE. The group raised it output target to 30 million b/d for 2012, at their last meeting on 14 December.

The IEA’s February report could herald another reduction if the Washington-based International Monetary Fund (IMF) revises its own economic growth forecasts. That report will be published on 24 January.