Global oil demand growth eased to its weakest since 2012 last quarter, calming world markets amid threats to supplies in the Middle East and North Africa, according to the International Energy Agency.
The IEA cut estimates for oil demand growth this year and next after the annual expansion in fuel consumption slowed to 700,000 barrels a day in the second quarter, the lowest level since early 2012. The resulting supply surplus has meant that Libya, seeking to restore crude exports choked off by political feuding, is struggling to find buyers, the agency said in its monthly market report. Logistical constraints in southern Iraq may prove a bigger hurdle to bolstering output than violence in the north, it said.
“Despite armed conflict in Libya, Iraq and Ukraine, the oil market today looks better supplied than expected, with an oil glut even reported in the Atlantic basin,” said the Paris- based agency, which advises 29 nations on energy policy. “The market appears confident that OPEC can deliver the production increase needed from it to meet rising demand expected in the second half of the year.”
Brent crude futures have declined 6.2% this year even as an Islamist insurgency flares in Iraq, tensions escalate between the West and Russia over Ukraine, and Libyan exports remain curtailed as political factions battle for control. Brent was at $104.20 a barrel on the ICE Futures Europe exchange in London today.
The agency reduced estimates for global oil demand growth in 2014 by 180,000 barrels a day following a weaker assessment of the world economy by the International Monetary Fund. Consumption will increase by 1 million barrels a day, or 1.1%, this year to average 92.7 million a day.
While demand growth will rebound next year, the pace will be 90,000 barrels a day slower than previously expected because of lower estimates for China and Russia. Global consumption will expand in 2015 by 1.3 million barrels a day, or 1.4%, to 94 million a day. Total demand levels for this year are little changed from last month’s projections, while growth is lower because of upward revisions to consumption data for previous years.
The agency’s outlook for demand in the second half of this year is stronger than previously assessed, meaning the amount of crude required from the Organization of Petroleum Exporting Countries will be 30.8 million barrels a day, higher than last month’s estimate. That’s about 360,000 a day more than the organization pumped in July.
Output from OPEC’s 12 members climbed 300,000 barrels a day in July to a five-month high of 30.44 million a day, as Saudi Arabia raised production and supplies recovered in Libya. The Gulf kingdom, OPEC’s biggest member and de facto leader, increased output to 10 million barrels a day, the most since September, the IEA said. Libyan output almost doubled to 430,000 barrels a day.
“The Atlantic market is currently so well supplied that incremental Libyan barrels are reportedly having a hard time finding buyers,” the agency said. “Many in the market seem more focused today on potential short-term downward price pressures from a further increase in Libyan production.”
Industry oil inventories in developed nations swelled to their highest since September, the agency said. Stockpiles of crude and refined products in the Organization for Economic Cooperation and Development increased for a sixth month in June, by 13.8 million barrels to 2.67 billion, narrowing their deficit to their five-year average.
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