EIA lowers global oil consumption projections

On the regulatory side the CFTC approved the swap definition by a vote of 4-to-1 required by the Dodd Frank Act. The swap definition will now trigger about 20 new Dodd Frank measures for reporting, clearing, trading and record keeping that could take effect as early as September. There is still a lot of work to be accomplished but the OTC market is now in play insofar as change is concerned.

The EIA released their latest Short Term Energy Outlook on Tuesday afternoon. As I suggested they did lower their projection for global oil consumption for 2012 and 2013 versus last month's report. They are now projecting about 700,000 bpd of oil demand growth for both 2012 and 2013 a reduction of about 100,000 bpd in 2012 and 400,000 bpd in 2013 from the last STEO based on the slowing of the global economy. Following are the main oil related highlights from the report.

The projected pace of global oil demand growth in this month's Outlook reflects less optimistic assumptions about the global economy. The forecast for global economic growth was lowered by 0.1 and 0.6 percentage points in 2012 and 2013, respectively, from last month's Outlook, and is now expected to average 2.9 percent in both years. The weaker growth outlook is prompted by increased economic concerns about the debt crisis in Europe and indications of slowing growth in China, both which could have spillover effects on other economies. The global liquid fuels consumption growth forecast for 2012 was lowered to 0.7 million bbl/d from 0.8 million bbl/d in last month's Outlook. Projected global consumption growth in 2013 was lowered by 0.4 million bb/d to 0.7 million bbl/d.

EU sanctions, including an embargo on Iranian crude and an insurance ban on tankers carrying Iranian oil, became fully effective on July 1, shortly after the latest set of U.S. sanctions entered into force. The United States issued exceptions to all major importers of Iranian oil from sanctions that could have been imposed on foreign financial institutions which facilitated oil-related transactions with the Central Bank of Iran, but only after they had demonstrated or pledged significant reductions in their purchases of Iranian crude oil. The complete market effects of these sanctions are unknown and difficult to disentangle from previous rounds of sanctions, but EIA believes that most of their current and expected effects on Iranian oil supplies have already been priced into the global oil market. Despite the market's mild reaction to the sanction start dates, upside price risks still persist, particularly if negotiations with Iran fail to progress.

World liquid fuels consumption grew by an estimated 0.8 million bbl/d in 2011. EIA expects consumption growth of 0.7 million bbl/d in both 2012 and 2013, with China, the Middle East, Central and South America, and other countries outside of the Organization for Economic Cooperation and Development (OECD) accounting for essentially all consumption growth (World Liquid Fuels Consumption Chart). Projected OECD liquid fuels consumption declines by 0.5 million bbl/d in 2012 and a further 0.3 million bbd/d in 2013.

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