IEA Raises Forecast for Global Crude-Oil Demand Even as 2011 Growth Slows
Aug. 11 (Bloomberg) -- Simon Wardell, energy research manager at IHS Global Insight, talks about the outlook for oil prices and demand after the International Energy Agency's monthly report cited “significant downside risks” to consumption. He speaks with Andrea Catherwood on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Global demand for oil will exceed the International Energy Agency’s earlier estimates, even as the adviser predicts the economic recovery will slow next year.
Crude demand worldwide will average 87.9 million barrels a day in 2011, the IEA said today in its monthly oil market report. While that is 50,000 barrels a day more than the Paris- based adviser forecast last month, it lags behind the upward revision of 80,000 barrels for this year’s estimate. There are “significant downside risks” that demand will slow on an uncertain global economic outlook, the IEA said.
“Global economic activity is seen expanding by 4.5 percent this year but remains capped at 4.3 percent next year,” according to the report. “Concerns that the global economic recovery may falter from the second half of 2010 pose a significant downward risk to the forecast.”
The IEA is projecting that China and other developing nations will offset shrinking demand for oil next year in richer countries such as the U.S., where the Federal Reserve said yesterday it won’t unwind stimulus measures because the economy is weaker than previously anticipated. Even China is showing signs of slowing growth, with industrial output increasing the least in 11 months, according to a report today.
Crude for September delivery fell as much as 1.2 percent to $79.26 a barrel in electronic trading on the New York Mercantile Exchange, leaving prices virtually unchanged this year.
‘Slightly Higher’
The energy adviser raised its estimate for worldwide oil consumption in 2010 and 2011 on “slightly higher” global economic growth forecasts by the International Monetary Fund in 2010. While its total oil demand outlook was increased, the IEA still expects consumption growth to slow next year.
Oil demand in developing economies, which will account for all the increase next year, will increase 3.7 percent in 2011, compared with 4.5 percent this year, according to the IEA. China will contribute about a third of world demand growth, increasing consumption by 420,000 barrels a day, or 4.5 percent. In 2010, Chinese oil demand is forecast to rise 9.2 percent.
Consumption in developed economies belonging to the Organization for Economic Cooperation and Development will shrink 0.4 percent in 2011 to 45.33 million barrels a day, after climbing 0.2 percent this year, according to the IEA. Demand in the U.S. will drop 50,000 barrels a day, or 0.3 percent, to 18.91 million barrels next year, the IEA said.
Rising Consumption
World demand will climb 1.3 million barrels a day, or 1.5 percent in 2011, down from this year’s growth of 1.8 million barrels a day, or 2.2 percent, the IEA said. Last month, it forecast 2010 growth of 2.1 percent and 1.6 percent in 2011.
Rising consumption will be more than offset by greater production from countries outside the Organization of Petroleum Exporting Countries, reducing the world’s need for OPEC oil, according to the IEA estimates.
Non-OPEC supply will average 52.9 million barrels a day in 2011, 100,000 barrels a day more than the IEA estimated last month. The revision was driven by higher U.S. production figures and greater-than-expected Chinese oil supply in the second half of this year, according to the agency. It also raised its supply forecast for 2010 by 200,000 barrels a day to 52.6 million barrels a day.
The IEA cut its outlook for the so-called call on OPEC crude. The producers, responsible for 40 percent of worldwide output, will need to provide an average of 29.1 million barrels a day next year to balance world supply and demand, or 100,000 a day less than the IEA forecast last month. The adviser also reduced its 2010 estimate by the same amount to 28.8 million barrels a day.
The 11 OPEC members bound by production quotas raised supplies last month by 190,000 barrels to 26.8 million barrels a day, according to the IEA. That implies compliance of 53 percent with record supply cuts set in 2008, down from an implementation rate of 58 percent in June.
Supplies from all 12 nations, including Iraq, increased by 220,000 barrels a day to average 29.2 million.
-- Editors: Mike Anderson, Raj Rajendran.
To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net
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