IEA cuts 2012 oil demand growth forecast

IEA cuts 2012 oil demand growth forecast

Mild weather in the northern hemisphere this winter and a rising likelihood of a sharp economic slow-down are expected to lead to lower global oil demand growth in 2012, the International Energy Agency said.

January 18, 2012 1:49 by Reuters

In its monthly oil market report, the Paris-based agency said there was a rising likelihood of a sharp economic slowdown in 2012, if not a downright recession.

“Euro zone indebtedness has not gone away, as downgrades to the credit ratings of a number of major economies testify,” the IEA, the energy agency for industrialised nations, said.

“Private sector credit is also in short supply, as the travails of refiner Petroplus show.”

The agency cut its 2012 global oil demand growth forecast by 220,000 barrels per day (bpd) from its previous monthly report to 1.1 million bpd.

The IEA, which advises industrialised countries on energy policy, warned that revisions to the GDP forecasts of the IMF and other institutions could result in zero growth in 2012, saying that a one-third downward revision of global GDP growth would see this year’s oil consumption unchanged.

“This alternative scenario is based upon the very real possibility that Europe’s current financial and economic woes – with many nations already bogged down in the early stages of recession – remain unsolved, spilling over into significantly lower growth elsewhere,” it said.

Mild winter weather, the European economic malaise and elevated oil prices contributed to a fall in demand growth in the last quarter of 2011, down 300,000 bpd to 89.5 million barrels bpd, and “pushing demand back towards a clearly declining year-on-year trend for the first time since the global credit crunch”.

The IEA said oil prices remained at elevated levels above $100 a barrel because of worries about production in Nigeria, Iraq and Iran.

“At least a portion of Iran’s 2.5 million barrels per day crude exports will likely be denied to OECD refiners during second half 2012, although more apocalyptic scenarios for sustained disruption to Strait of Hormuz transits look less likely,” it added. (Reporting by Zaida Espana and Dmitry Zhdannikov, Editing by Christopher Johnson and Jason Neely)