Oil demand growth looking sub-par

Yesterday afternoon the EIA released their monthly STEO report while the IEA just released their report. Neither agency made any strong downward adjustment to oil demand growth but at least the IEA said that the way the global economy is going, it could cut oil demand growth next year by more than 60%. At least they are acknowledging that oil demand growth is likely to underperform the forecasts they just have not made those adjustments to their forecasts. Following are the main highlights of both the IEA and EIA reports.

Highlights from the IEA report.

Market crude prices have lost $12-$15/bbl since early-August amid growing concerns over government debt and the likely impact on the global economy. At writing, Brent and WTI futures stood at $103/bbl and $80/bbl respectively. This follows July’s relative calm, when crude rose by $1-$3/bbl, accompanied by modest gains in refining margins.

Global 2011 oil demand is trimmed by 0.1 mb/d on weaker baseline and 2Q11 data, high prices and slowing economic growth. The 2012 outlook is raised by 0.1 mb/d due to oil-fired power needs in Japan. Demand averages 89.5 mb/d in 2011 (+1.4% or 1.2 mb/d y-o-y) and 91.1 mb/d in 2012 (+1.8% or 1.6 mb/d). A lower GDP case would cut 0.3 mb/d and 1.3 mb/d respectively from 2011 and 2012 demand.

World oil supply in July rose by 0.6 mb/d from June, to 88.7 mb/d, with non-OPEC production up by 0.4 mb/d. Rising Canadian production offset lower UK production. Non-OPEC supply is now seen averaging a lower 53 mb/d in 2011 on prolonged production outages, rising to 54 mb/d in 2012.

OPEC crude supply in July averaged 30.05 mb/d, up by 0.1 mb/d from June. Output has regained levels close to those seen before the Libyan crisis, although OPEC spare capacity now stands at only 3.3 mb/d. Output still lags a ‘call on OPEC crude and stock change’ that averages 31 mb/d in 2H11 and 30.8 mb/d for 2012.

June OECD industry oil inventories fell counter-seasonally by 11.8 mb to 2 678 mb, or 58.4 days of forward demand. The surplus to the five-year average narrowed significantly, from 18.2 mb in May to 4.7 mb in June. Preliminary July data suggest an 18.5 mb gain in onshore OECD inventories, but floating storage fell.

Global refinery crude runs for 2Q2011 have been raised by 0.1 mb/d since last month, as surging Russian June throughputs offset weaker-than-expected Chinese runs. 3Q11 estimates are unchanged, up 2.2 mb/d from 2Q11, at 75.9 mb/d, as stronger expected OECD runs counteract a weaker picture for non-OECD Asia.

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