No improvement on the horizon for global oil demand – IEA

13 March 2013 10:57  [Source: ICIS news]

LONDON (ICIS)--The macroeconomic environment underpinning global oil demand shows little sign of improving, the International Energy Agency (IEA) said on Wednesday, as the Paris-based organisation cut its forecast for 2013 oil demand to 90.6m bbl/day.

Following a 90,000 bbl/day reduction in its global demand estimate in last month's report to 90.7m bbl/day, the IEA currently predicts 820,000 bbl/day annual growth of global oil demand this year, compared to an average of 1.4m bbl/day growth in non-recessionary years.

The organisation cited the recent US sequester, worsening business sentiment in China and continuing deterioration of the European employment market as factors behind the reduction in its expectations for demand in 2013.

Demand levels for the fourth quarter of 2012 were also revised down by 205,000 bbl/day to 90.8m bbl/day.

The IEA also noted that the death of former Venezuelan President Hugo Chavez had made the future of the country more uncertain for oil market players.

The IEA said: ”Compared to the turmoil that has swept parts of the Middle East and North Africa, the passing of Venezuela’s charismatic President Hugo Chavez cannot really be termed a crisis for the market.

“Yet there is no doubt that his death leaves his country, the holder of the world’s largest oil reserves, at a crossroads,” it added.

However, the agency noted that oil prices had continued to drift down following news of Chavez’ death instead of spiking, indicating that the market did not expect supply from Venezuela to be seriously disrupted.

Oil future prices reversed their upward course in mid-February, falling to a nine-week low in early March, the agency said. Brent crude futures were trading at $109.91/bbl and WTI was trading at $92.88/bbl at the end of the European business day on Tuesday, according to ICIS data.

Global oil supply was up 90,000 bbl/day in February to 90.8m bbl/day, the IEA said, driven by a 150,000 bbl/day increase in OPEC-produced crude. Increased Iraqi supply levels were understood to be behind the uptick in OPEC production which stood at 30.49m bbl/day during February.

Non-OPEC output fell by 60,000 bbl/day in February to 54.1m bbl/day, but remained 600,000 bbl/day higher than during the same period in 2012, as North American gains helped to offset lower European and Latin American production.

The IEA cut the estimate of global crude refinery runs to 74.8m bbl/day on heavy US refinery maintenance and sluggish European refining activity. The trend is likely to continue in light of expected heavy maintenance in Asia from March onwards, the agency added.

“As seasonal maintenance winds down in the US and Europe, Asia is just getting started, with a very heavy turnaround schedule from March onwards,” the IEA said.

By: Tom Brown
+44 208 652 3214

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