Oil demand growth in 2012 could stall: IEA

Reuters/LondonGlobal economic slowdown may stifle oil demand growth next year, the West’s energy watchdog said yesterday, while warning that tightening supplies could still spur yet more oil price volatility.The International Energy Agency, adviser to industrialised nations on energy policy, said that although it had not made big changes to its oil demand growth estimates for 2011 or 2012, its predictions were now at the mercy of the global economy’s performance in the months to come.“Recognising emerging economic storm clouds, we also run a lower, 3% global GDP growth scenario, which more than halves base case 2012 oil demand growth to only 600,000 barrels per day (bpd),” the agency said in a monthly report.The IEA is the last of the three top oil forecasters to publish its estimates this month.On Tuesday, oil producing group Opec and the US government’s agency, the Energy Information Administration, both revised their oil demand growth estimates on the back of a worsening economic outlook. The reports come as grim economic news and European and US debt struggles stoke fears of another global downturn, with oil prices falling around 15% over the past week in a sharp worldwide flight from risk. An increase of 600,000 bpd demand growth for 2012 would be only a fraction of its current estimates based on global GDP growth assumptions of 4.2-4.4% for 2011-2012 and less than a quarter of very impressive growth in 2010.“That said, our global 2011/2012 GDP growth assumption in excess of 4% might seem optimistic in the present climate,” said the agency, which expects the world to consume just over 91mn bpd (mbd) in 2012.Olivier Jakob from Petromatrix said he believed the presence of two scenarios in the IEA report was due to the fact the IEA was obliged to use forecasts from the International Monetary Fund even though it might not necessarily agree with them.The IEA was not immediate available for further comment.The IEA has long said its calculations show that global oil demand has historically grown at a rate of 90% of the global GDP growth minus 2 percentage points. That means oil demand shows practically no growth during a year when the global economy grows by 2.5-3%.Based on current global economic forecasts, the IEA trimmed its 2011 global oil demand growth by just 60,000bpd to 1.2mn bpd, reflecting recent high oil prices and slower economic growth.It raised its 2012 global oil demand growth forecast by 70,000bpd to 1.61mbd, partly due to Japan’s higher oil-fired power needs.On Tuesday, Opec lowered its growth forecast for next year marginally, by 20,000bpd to 1.3mbd, while the EIA raised its forecast for 2012 by 60,000bpd, with consumption now expected to climb 1.64mbd next year.Despite global economic worries, the IEA said supplies remained tight, echoing opinions from Opec and the EIA.It said Opec’s output inched higher in July to 30.05mbd, close to pre-Libyan crisis levels.But Harry Tchilinguirian from BNP Paribas noted that similar to remarks from Opec and the US government, the IEA said Opec was still under-producing around 700,000bpd to fill the supply gap later this year.“So absent a further increase in production, inventories will have to be drawn or the price has to rise to ration demand,” said Tchilinguirian.The IEA said Opec’s spare capacity had shrunk to 3.3mbd, a level it described as “fairly meagre in comparison to the totality of currently perceived supply-side risks”.