The International Energy Agency trimmed forecasts for global oil demand this year for the first time in three months as constrained economic growth undermines fuel consumption.
The adviser reduced estimates by 90,000 barrels a day following a weaker outlook from the International Monetary Fund, and predicted that world oil demand will increase by 840,000 a day in 2013, or 0.9 percent, to 90.7 million. OPEC output fell to its lowest in a year, limiting the relief for prices from an increase in spare production capacity, the IEA said. Brent crude rose to the highest in nine months Feb. 8.
“The reduction in the IMF outlook for Europe seems particularly ominous,” the Paris-based agency said in its monthly oil market report. “Despite signs of improvement in China and the U.S., weak macroeconomic conditions are forecast to keep global oil demand growth capped.”
Brent futures have increased 7 percent this year amid signs of recovery in the U.S. and China and concern that political tensions may disrupt Middle East oil exports. Price gains have been capped by concern that Europe’s debt turmoil may hinder the world economy’s rebound. The IMF curtailed estimates for global economic expansion in 2013 to 3.5 percent, from 3.6 percent, on Jan. 23 and forecast that the euro area will contract.
Brent traded at $118.72 a barrel on the London-based ICE Futures Europe exchange at 8:13 a.m. local time.
“There are some warning lights flashing on the economy at the moment,” said Filip Petersson, a commodities strategist at SEB AB in Stockholm. “We have an oversupply on a global basis, and there’s been about Europe again with its economic problems. Oil prices seem overstretched generally, but we still need some trigger to release the correction.”
The Organization of Petroleum Exporting Countries trimmed production by 100,000 barrels a day in January to 30.34 million a day as lower output in Nigeria, the United Arab Emirates, Iran and Libya countered an increase in Saudi Arabia and Kuwait, according to the IEA. That still leaves the group’s output about 600,000 barrels a day higher than the average of 29.7 million needed in the first quarter, the agency said.
OPEC’s unused production capacity increased to 3.63 million barrels a day last month from 3.26 million in December, with most of the spare output held in Saudi Arabia. Concern that a terrorist attack last month at a gas facility in Algeria may lead to further disruptions is preventing the additional spare capacity from calming oil prices, the agency said.
The IEA boosted forecasts for supplies from producers outside OPEC by 80,000 barrels a day amid stronger-than-expected growth in North America. Non-OPEC producers such as the U.S., Canada and Brazil will bolster output by 1 million barrels a day this year to 54.4 million, the report indicated.
The increase in non-OPEC supply and the cut in its global demand forecast reduced the IEA’s estimate for the average output OPEC will need to provide this year by 100,000 barrels a day to 29.8 million.
OPEC yesterday raised its 2013 world demand estimate by about the same amount as the IEA is lowering its own. That still leaves the producer group’s assessment estimate of global consumption about 1 million barrels a day lower than the IEA’s, at 89.7 million.
Oil inventories in the world’s most industrialized nations were 38.7 million barrels above their five-year average, the biggest surplus since January 2011, after falling by less than normal in December, according to the report. Stockpiles in the Organization for Economic Cooperation and Development slipped 22 million barrels to 2.7 billion.