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IEA lowers world oil demand forecast amid market turbulence
AFP
PARIS
Petroleumworld.com 09 13 07
The International Energy Agency lowered its predictions of global oil demand Wednesday for both this year and next and warned that financial markets turbulence could force it to again revise its forecast.
The IEA, which acts as energy policy advisor to industrialised countries, reduced its demand forecast to 85.9 million barrels per day in 2007 and 88 million bpd in 2008 from its prediction last month of 86 and 88.2 million bpd respectively.
"Mild weather and interfuel substitution have contributed to the fall in demand," it said in its latest monthly report. "Looking ahead, continued high prices may further dent demand."
World oil prices were on Wednesday near all-time highs above 78 dollars after the OPEC cartel agree to what traders call a token output hike.
The IEA said its downard revision of demand had also been influenced by the OECD's lowering of its 2007 outlook for the US economy amid concerns regarding the troubled subprime home loan sector.
The world's foreign exchange and stock markets have been volatile over the last few weeks amid concerns over the US subprime sector of housing loans to customers with patchy credit histories.
The defaults on subprime loans have raised fears that the flow of credit will dry up in world markets as investors scramble to contain their losses.
"The potential spill-over effects of the subprime crisis, which became particularly acute in August, are yet to be assessed," said the IEA.
"It is likely that credit conditions in the US and other developed countries will tighten. As such, we may further revise our 2008 forecast as events unfold," said the report.
The energy watchdog revised its oil product demand in OECD countries downwards in both 2007 and 2008.
"Fuel oil and heating oil deliveries in June and July turned out to be weaker than expected, particularly in Europe and the Pacific, thus offsetting upward revisions in the first half of 2007," it said.
Demand in the the group of 30 industrialised nations in the OECD is now poised to increase by 0.4 percent in 2007 to 49.4 million bpd, and by 1.6 percent in 2008 to 50.2 million bpd, said the IEA.
But it warned that this forecast was "open to revisions should the fallout of the subprime meltdown in the US prove to be more harmful than currently expected."
It said that non-OECD oil product demand had remained virtually unchanged, as slight upward adjustments in China and the Middle East offset downward changes elsewhere.
"Overall, non-OECD demand is expected to reach 36.5 millon bpd in 2007 (+3.5 percent on an annual basis) and 37.8 million bpd in 2008 (+3.6 percent).
"This relatively strong outlook continues to be supported by strong oil consumption in both China and the Middle East, which together account for over half of worldwide demand growth," it said.
"As such, if subprime woes are limited purely to the OECD, global demand would likely remain robust," it said.
The IEA said world oil production had fallen 0.43 percent in August to 84.6 million bpd because of production interruptions in the Gulf of Mexico and the North Sea and a fall in Iraqi exports.Production by the OPEC cartel, which controls 40 percent of the world's oil, was 30.4 million bpd in August, slightly down on July.
The production capacity of OPEC, which on Tuesday decided to pump an extra 500,000 bpd from the start of November, should rise to 34.5 million bpd by the end of 2007 and to 35.8 million bpd by the end of 2008.
The IEA held its non-OPEC production forecast at 50 million bpd for this year but revised it slightly upwards for next year to 51.1 million bpd.
AFP 12 1022 GMT 09 07
Copyright© 2007 AFP. All rights reserved.
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