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IEA sees signs of end to seven-year oil hunger
AFP
PARIS
Petroleumworld.com 09 13 06
The hunger to consume oil products seems to be slowing after a seven-year binge, the IEA signalled on Tuesday amid falling prices and a decision by OPEC to hold its output ceiling steady.
The growth of consumption would be slightly less strong than expected this year and next, mainly in the United States and Mexico, the agency said.
Its monthly report highlighted "a precipitous 30.0 percent decline in the US gasoline market dragging down crude prices by 6-18 percent".
The key question now was whether this fall "marks the top of oil's seven-year bull market rally or is merely a pause before reaching greater heights".
The IEA also noted that a downgrading of hurricane forecasts, improved prospects for repairs to facilities at the Prudhoe Bay field in Alaska, and the effects of high prices on consumer behaviour had taken some of the heat out of oil prices.
Tension in the oil market over possible United Nations sanctions against Iran's nuclear programme had also eased.
The report, in presenting the latest analytical data, also warned that the risks to global economic growth "are increasing", and therefore "the risks to oil product demand growth projections have also risen".
The International Energy Agency said it now expected demand for oil to rise by 1.3 percent this year instead of 1.4 percent estimated previously to 84.7 million barrels per day, a reduction of 100,000 barrels day from the August forecast.
And demand would rise by 1.8 percent next year instead of 1.9 percent forecast last month, to 86.2 mbd.
The Organization of Petroleum Exporting Countries, which decided yesterday to hold its production ceiling at 28.0 million barrels per day, had been producing about 30.0 mbd for 20 months and experts were focusing on the possibility that this would be reduced next year, the agency said.
There was also continuing concern that OPEC had only a narrow cushion of spare production capacity.
In August supplies from OPEC averaged 30.0 mbd, or 270,000 bpd less than an upwardly revised July base figure.
Meanwhile, world oil supply had dropped by 400,000 barrels per day in August to 85.8 mbd. Output from the North Sea, Iran and Saudi Arabia had also fallen.
Iraqi production stabilised at 2.0 mbd in August and Nigerian output at 2.3 mbd.
"Pipeline outages continue to restrict supply from Iraq and Nigeria."
The IEA trimmed its forecast for non-OPEC supplies by 60,000 bpd this year to 51.0 mbd and by 145,000 bpd next year to 52.8 mbd.
Total industry stocks in the area covered by the Organisation for Economic Cooperation and Development grew by 22.0 million barrels in July to 2.668 billion barrels, representing an unchanged 54 days of consumption.
Noting signs that high prices were changing behaviour, the report said that although US summer demand for gasoline was following the patters of the driving season, in the United States "consumers appear to be switching to cheaper grades".
And "there has also been an increase in the use of public transportation in large metropolitan areas, according to the American Public Transport Association".
The report continued: "It seems likely that retail prices will fall sharply over the next few months, in absence of course of any hurricane emergency, given August's 30.0-percent decrease of wholesale gasoline prices."
But a contrary indicator was US demand for diesel, a good indicator of economic activity via the transportation sector, which had remained buoyant in July.
The IEA said that US demand for airliner fuel was weak but this reflected measures by airlines to reduce their costs, by consolidating routes and increasing the number of passengers carried per plane.
The agency said it had reduced only slightly its estimates of demand for airliner fuel in Britain because the discovery of an alleged terrorist plot at Heathrow airport on August 10 had not so far appeared to have disrupted demand much.
The report also noted that in Japan sales of so-called "mini-vehicles" were strong, rising for the seventh month in a row in July as sales of other vehicles fell. "Small cars now account for roughly a third of Japan's fleet."
Chinese "apparent" demand for oil remained strong in July and the government was "strictly controlling gasoline exports in order to avoid shortages as happened a year ago when refiners ramped up exports to compensate for their price-induced domestic losses", the report said.
AFP 12 0920 GMT 09 06
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