IEA raises oil demand outlook on European, US growth

Oil pumps in operation at oilfield near central Los Angeles The International Energy Agency issued an upbeat outlook for the United States and Europe on Wednesday, saying economic recovery in the advanced economies is expected to lift global oil demand. The IEA, highlighting strongly growing consumption in the United States as economic recovery takes hold, said that it was raising its oil demand forecast for 2013 and 2014.
However, the post-recessionary bounce is not expected to last, particularly since the Asia-Pacific region is expected to drag global demand down with its trend of falling consumption.
And despite the stronger-than-expected performance by the world's richest economies, it is the non-OECD economies which are still forecast to continue leading oil demand growth.
The IEA raised its estimate of the growth of global oil demand this year by 1.3 percent to 145,000 barrels per day (bpd).
This meant it expected total demand to rise by 1.2 million barrels per day (mbd) overall in 2013 from the level in 2012.
That would take aggregate demand this year to 91.2 mbd, and this would rise by 1.2 mbd in 2014, to reach 92.4 mbd.
The IEA noted that US oil demand booked the "fastest pace of growth experienced in nearly 10 years, and even longer if growth is measured in percentage terms".
Demand for September averaged nearly 19,100 bpd, up 0.9 mbd year on year, said the agency.
The eurozone, which emerged from recession in the third quarter, also contributed to the global increase.
"Large North European economies such as Germany, France, Belgium, the UK and much of Scandinavia have led the upside, but even the Mediterranean region, where demand had nosedived, has enjoyed a significantly slower pace of decline," said the IEA.
Average demand growth for the continent stands at about 175,000 bpd, reversing a previous decline rate of 530,000 bpd.
Meanwhile, supplies were also up in November, gaining 310 kbd to 92.3 mbd, fuelled by an increase in non-OPEC production.
Non-OPEC supplies rose by 470,000 barrels per day during the month on an annual basis to 56.16 mbd.
OPEC output was down in November for the fourth month in a row to reach 29.73 mbd, down by 160,000 bd from October.
"The decrease in November crude oil output was mainly the result of a drop in Libya?s production, although smaller declines occurred in Nigeria, Kuwait, UAE and Venezuela. All of these decreases more than offset higher output in Iran, Iraq, and Angola."
Saudi Arabia's production averaged 9.75 mbd in November, unchanged from October.
Meanwhile, Iran's crude production rose only slightly to 2.71 mbd in November from 2.68 mb in October, despite a landmark interim agreement between Tehran and world powers to curb Iran's nuclear drive.
The accord done in Geneva requires Tehran to freeze its nuclear programme for six months in exchange for limited sanctions relief.
However, the IEA said the agreement would have limited impact on supplies, as existing US and EU sanctions on Iranian oil exports remain firmly in place.
"While Tehran will find it easier to ship its oil, notably to India, the lifting of insurance restrictions does not open the floodgates for Iran oil exports," it added.
If a broader agreement is done however, the end of Iran oil sanctions could pose a challenge for other producers, which are already facing competition from rising non-OPEC supplies, said the IEA.
But a more pressing issue is falling inventories amid stronger EU, US demand, the agency said.
Commercial oil inventories in OECD member countries stand at 2,684 mb, 12.2 mb below levels a year ago. It is also a 19.7 mb deficit to the five year average.
Source: AFP