The International Energy Agency reduced its forecasts for global oil demand in 2013 for a third consecutive month, predicting the weakest consumption in Europe in almost three decades.
The IEA cut its estimate by 45,000 barrels a day, predicting that world consumption will increase by a “subdued” 795,000 barrels a day, or 0.9 percent, to 90.58 million barrels a day this year. European demand will slump by 330,000 barrels a day. Still, an imminent recovery in refinery operations after maintenance and political threats to supply mean “it may be too early to call a bear market,” the IEA said.
“Europe remains by far the worst affected of all the large oil consumption regions, as the ravages of the bleak macroeconomic backdrop continues to take its toll,” the Paris-based group said in its monthly oil market report.
Brent futures have dropped 12 percent from this year’s intraday peak, trading at about $105 a barrel in London today, as the euro area struggles to move beyond its debt crisis, China shows muted signs of recovery and the U.S. Federal Reserve discusses reducing its bond-buying program.
Oil consumption in the most developed European economies will drop to 13.4 million barrels a day this year, the lowest since 1985, the IEA said.
“Demand is going to continue to surprise to the downside, supply will continue to surprise to the upside,” Seth Kleinman, head of energy strategy at Citigroup Inc., said at the Bloomberg Oil Forum in London on April 11. “The downward pressures are increasing” on prices, Kleinman said.
Worldwide consumption remains supported by emerging economies such as China, where demand will increase this year by 380,000 barrels a day, or 3.9 percent, to 10 million a day, according to the IEA’s report.
“China will be the leader of growth,” Ibrahim Muhanna, an adviser to Saudi Arabia’s oil minister, said in Kuwait yesterday. The kingdom’s projection for demand growth this year is higher than the IEA’s, at about 1 million barrels a day, as it predicts that Asia and the Middle East will compensate for the slump in Europe.
“Demand for oil in the rest of the world will grow at good levels as a result of economic growth and improved standards of living,” Muhanna said.
Saudi Arabia, the world’s largest oil exporter, “seems poised to ramp up” production further to meet seasonal demand, after restoring output to a four-month high of 9.3 million barrels a day in March, an increase of 50,000 a day from February, the IEA said.
Total production among the Organization of Petroleum Exporting Countries slipped by 140,000 barrels a day last month to 30.44 million a day, as the Gulf kingdom’s increase was countered by lower output from Iraq, Iran, Nigeria, Libya and Algeria. Production fell the most in Iraq, by 150,000 barrels a day to 2.96 million, as bad weather curbed operations at the port of Basra, according to the report.
Consumers’ imports of crude from Iran fell to 1.1 million barrels a day in March from 1.26 million in February amid international sanctions on the Islamic Republic, the IEA said.
The IEA reduced its estimate for supplies from outside OPEC in 2013 for the first time, by 20,000 barrels a day, amid lower-than-expected output from the North Sea. Non-OPEC producers such as the U.S., Canada and Brazil will increase supplies this year by 1.1 million barrels a day to 54.4 million a day, according to the report.
Yesterday OPEC trimmed its global oil demand estimate for 2013 by 40,000 barrels a day. The organization predicted that demand will grow by 800,000 barrels a day this year, or 0.9 percent, to 89.66 million a day.
Oil inventories in the most industrialized nations remained above their five-year average for a sixth month in February, even after a drop of 32.9 million barrels to 2.66 billion barrels, the IEA estimated.
“There’s no major region that makes your heart jump,” when looking at oil demand, said Filip Petersson, a commodities strategist at Stockholm-based SEB AB, who predicts that Brent, the European benchmark, will average $107.50 a barrel during the second quarter. “It’s primarily a general oversupply situation. We’ve had a substantial oversupply in the first two quarters.”