IEA oil demand estimates down as Saudi cuts exports to 3-year low

LONDON (ICIS)–The International Energy Agency (IEA) on Thursday revised down its estimates of global oil demand growth rate on weaker outlook for Europe and China, adding that Saudi exports are at their lowest since September 2011.

Global demand for 2014 is now expected to rise by 900,000 bbl/day, to 92.6m bbl/day. IEA’s current growth rate forecast is down by 150,000 bbl/d from its previous predictions.

A growth of 1.2m bbl/day is forecast for 2015, down from its previous estimate of 1.3m bbl/d, taking global deliveries to 93.8m bbl/day, the IEA added.

“Oil prices fell sharply in August, weighed down by abundant supplies and further indications of slow global economic and oil-demand growth,” IEA said.

Global supply was down 400,000 bbl/d in August to 92.9m bbl/d on lower non-OPEC production, but supply was 810,000 bbl/d higher compared with a year earlier.

An increase in non-OPEC supply of 1.2m bbl/d has more than offset a 515,000 bbl/d OPEC decline, IEA noted. 

Crucially, OPEC production fell by 130,000 bbl/d in August to 30.31m bbl/d as a steady recovery in Libya was insufficient to make up for a fall in Saudi Arabian and Iraqi oil supply.

“The latest dip in Saudi supply seems primarily to reflect reduced import demand from US refiners, as well as weaker‐than‐expected crude demand in Europe and Asia,” IEA said.

Shifts in the direction of OPEC export flows are now as crucial in world oil markets as the oil cartel’s aggregate production levels, IEA said.

Saudi Arabia, OPEC’s biggest member, cut production by 330,000 to 9.68m bbl/d in August and shipping data revealed a sharp drop in Saudi exports last month.

Official data shows the country exported 6.95m bbl/d in June and 6.99m bbl/d in May, the lowest levels since September 2011.

Saudi Arabian exports are now undergoing a similar shift to west African crude in that exports to the US are shrinking. Saudi exports to the US dropped from 1.4m bbl/d in January-May to just over one million bbl/d in June.

In London, ICE Brent crude oil futures fell by more than a dollar after the IEA cut its estimates for global oil demand amid ample supply.