Falling
oil prices could soon be matched by a slowing of supplies, the IEA
warned today, lowering again its demand outlook because of weak
growth of the global economy. Although the speed of slowing oil
demand was a "surprise", a "staggering" increase
in supplies was a bigger factor behind the fall of prices and rise of
stockbuilding, the International Energy Agency said in its October
report. The IEA again cut its forecasts for growth of global oil
demand for the third month in a row. For this year, it expects demand
to rise by 700,000 barrels per day to 92.4 million barrels per day
which is 200,000 bd less than the previous forecast. This shrinking
demand outlook in European and Asian members of the Organisation for
Economic Cooperation and Development matched average growth of 1.0
mbd in countries outside the OECD areas, the IEA said. The IEA is the
oil-policy arm of the OECD which groups 34 advanced economies. For
next year, the agency cut its estimate of global demand from 93.8 mbd
to 93.5 mbd. However, that represents an increase of 1.1 mbd from the
level this year because demand will pick up somewhat as the global
economy brightens, pulled by emerging economies, the IEA said. "While
the abrupt slowdown in demand growth in the second quarter of 2014
has come as a surprise, supply growth looms larger as a factor behind
the recent easing of market balances and OECD stock builds," the
report said. "It jumped to a staggering 2.8 mbd in September
year on year, as OPEC output swung back to growth for the first time
in about two years." "Abundant" supplies, slowing
demand and strength of the dollar had pushed down oil prices for the
third month in a row, and the price of Brent oil for October delivery
had fallen to less than USD 90 a barrel in October, the IEA noted.
However, these steep price falls since June, with Brent oil price at
four-year lows, "are casting doubt on the sustainability of
current high growth rates," the IEA warned. The IEA said that
"September may turn out to be a high-water mark for supply."
This was also because growth from outside OPEC was expected to slow
in the last quarter of this year, and because political risk to
output in Libya and Iraq was "exceptionally high". At PVM
oil market analysts in London, David Hufton commenting on the IEA
report, said: "It makes no sense at all for OPEC members to try
and defend price by cutting production only for non-OPEC producers to
jump in and grab market share."
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