IEA CUTS 2014 OIL DEMAND

The International Energy Agency today cut its 2014 forecast for oil demand to 92.7 million barrels a day owing to weaker than expected global economic growth. The revised forecast was 130,000 barrels a day lower than the IEA's estimate a month earlier. It reflects the "growing realisation that macroeconomic conditions, although still likely to strengthen in the second half of the year, will probably now do so at a less dramatic pace than previously forecast," a statement said. International Monetary Fund chief Christine Lagarde suggested last week that the IMF's 3.6 per cent global growth forecast for 2014 might have to be trimmed back. Her warning that the global economic recovery could be "less robust than expected" appears to have been borne out by recently released economic data. Europe's biggest economies this week reported slumping industrial production -- a key indicator of economic health. And the US said late last month that business activity had declined by a steep 2.9 per cent in the first quarter of the year, its biggest quarterly contraction in five years. On the supply side, members of the OPEC cartel pumped out 40,000 barrels a day less in June to 30.03 million on a daily basis, with a decline in Iraqi output partly offset by small increases from Saudi Arabia, Iran, Nigeria and Angola. The IEA said an offensive by jihadists in north Iraq had cut output by 260,000 barrels a day in June to 3.17 million, after fighting forced the closure of the country's biggest refinery and slashed production from the giant Kirkuk field. The prized oil fields have been protected physically from the fighting so far, but the IEA warned there were still risks that the militants could damage oil installations. "Should ISIS militants strike the southern oil network -- now churning out nearly all of Iraq's supply to world markets and generating most of Baghdad's revenue -- Asia, which takes roughly 60 per cent of Basra Light shipments, would be most vulnerable," it said. China is the biggest buyer of Iraqi oil while India is the second biggest, the IEA noted. In Baghdad, the government accused Kurdish peshmerga fighters of seizing two key northern oil fields near the disputed city of Kirkuk, as relations between Baghdad and the autonomous Kurdistan regional government (KRG) hit a new low. "The oil ministry strongly condemns the seizure and control of crude oil (wells) in the Kirkuk and Bey Hassan oil fields this morning by groups of Kurdish peshmerga forces," a statement said. The fields have a combined daily output capacity of 400,000 barrels per day, a ministry spokesman said. Both fields have been offline since March.