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Oil demand to resist any US slowdown in 2007: IEA
By Adam Plowright
AFP
PARIS
Petroleumworld.com 11 11 06
World demand for oil would remain strong next year even in the event of a slowdown in the US economy, partly because of an "economic decoupling" of Asia from the United States, the International Energy Agency said on Friday.
The Paris-based energy watchdog responded to arguments that weaker growth in the US next year would hit expansion in China and the broader Asia region, which has been driving growth in oil demand this year.
"Even if the US economy were to slow down, the world economy -- and global demand -- are likely to hold their ground for two reasons," the IEA said in its monthly report on the oil market.
"On the one hand, Chinese investment-driven growth will arguably continue, especially given the considerable infrastructure needs of the forthcoming 2008 Olympics.
"On the other, increasing trade within Asia and between Asia and Europe has to some extent resulted in a degree of economic decoupling from the US."
Some economists have suggested that a slowdown in the US, widely predicted by analysts because of further increases in interest rates over 2006, would be acutely felt in Asia, given the high dependency of China on the appetite of US consumers for its manufactured goods.
This would have repercussions for the crude market, which has been pushed to record highs this year partly as a consequence of surging demand from growing Asian economies.
The US economy slumped to its worst growth rate since early 2003 in the third quarter, according to data published last Friday, owing to a slowdown in the booming property market.
Updating its forecasts for oil demand this year and next, the IEA trimmed its 2006 figures but kept its predictions for 2007 broadly unchanged.
Demand in 2006 is forecast to grow by 1.1 percent this year, instead of 1.2 percent as previously predicted by the IEA, to an average of 84.5 million barrels of oil per day.
In 2007, demand is forecast to expand by 1.7 percent at 85.9 million barrels per day (bpd), slightly lower than a previous forecast of 86 million bpd.
World oil supply in October stood at 85.3 million bpd in October, 100,000 bpd more than in September.
Production from the Organisation of Petroleum Exporting Countries fell 335,000 bpd in October to 29.4 million bpd owing to lower output from Iraq, Saudi Arabia, Iran and Venezuela, the IEA said.
The 11-member exporters group announced in October that they would cut their collective output by 1.2 million bpd from November 1 in an attempt to stem recent falls in the price of crude, which was trading just below 61 dollars per barrel on Friday in New York and London.
"It is too early to gauge adherence to the proposed November cuts," the IEA said.
"Arab Gulf producers are seen as most likely to cut supply while others see Iran, Venezuela and the North African producers' positions as being more ambiguous."
There has been widespread scepticism among analysts about whether OPEC producers would actually scale back their production to meet the reduced quota, which would require them to forgo oil revenues at a time of high prices.
The IEA was set up during the 1973-74 oil crisis with a mandate to issue research and suggestions on energy policy to the 26 governments which founded the institute.
AFP 10 1156 GMT 11 06
Copyright© 2006 AFP. All Rights Reserved.
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