The International Energy Agency lowered its world oil-demand forecast for this quarter for a second time, citing weakness in Europe’s economy and disruption to U.S. fuel delivery and travel by Hurricane Sandy.
Global consumption in the period will average 90.1 million barrels a day, which is 290,000 barrels a day, or 0.3 percent, less than previously forecast, the Paris-based agency said in a monthly report today. Demand will expand by 670,000 barrels a day this year to 89.6 million, the IEA said, shaving 60,000 barrels a day from its previous annual growth forecast.
The Organization of Petroleum Exporting Countries will need to supply 30 million barrels a day this quarter, 500,000 barrels a day less than in the IEA’s previous projection because of the weaker demand outlook and expectations for increased non-OPEC supply. Global demand will rise by 830,000 barrels a day in 2013 to 90.4 million, 70,000 barrels less than last month’s forecast.
“Weak demand from Europe won’t go away, so the physical oversupply in the oil market is likely to stay longer,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “The gap between OPEC supply and demand for its crude is likely to remain high, if not rising further.”
Brent crude has dropped 3.5 percent so far this quarter, trading at $108.50 a barrel in London today, as supply outpaces demand. Saudi Arabian Oil Minister Ali al-Naimi said Nov. 11 that the market situation is comfortable and that he was happy with current price levels.
Hurricane Sandy battered the U.S. East Coast in late October, trimming U.S. oil demand that month, the IEA said. Several refineries are still shut for repairs following the storm, including Phillips 66’s 238,000 barrel-a-day refinery in Bayway, New Jersey, and Hess Corp.’s 70,000 barrel-a-day Port Reading plant in the same state.
The IEA is overly pessimistic on fourth-quarter oil demand, according to BNP Paribas SA.
“Setting aside Europe, the IEA is ignoring the potential for oil demand acceleration in China,” Harry Tchilinguirian, BNP Paribas SA’s head of commodity markets strategy in London, said by e-mail after the agency’s report was released. “Equally, U.S. economic data is showing green shoots, which should allow for better than expected demand numbers than currently envisaged.”
Global oil supply rose by 800,000 barrels a day last month to 90.9 million barrels a day as higher supply from the Americas and the North Sea offset a decline in OPEC output.
The IEA, an adviser to 28 industrialized nations, raised its 2013 forecast for non-OPEC supplies by 150,000 barrels a day to 54.1 million barrels a day.
OPEC supply dropped by 30,000 barrels a day in October to the lowest level in nine months, according to the IEA. The 12 OPEC nations supplied 31.16 million barrels a day in October, which is 4 percent more than the supply limit of 30 million barrels agreed at their last conference in June.
Flood-related disruptions reduced flows in Nigeria, while output from Iran increased, “partially reversing a seven-month downtrend,” the agency said.
Call on OPEC
The group, which meets to review output targets in Vienna on Dec. 12, will need to supply 29.8 million barrels of crude a day in the first quarter of next year, according to the IEA’s projections, or 100,000 barrels a day less than the agency forecast a month ago. The so-called ’call’ on OPEC for 2013 was revised 200,000 barrels a day lower to 29.8 million from last month’s report.
With rising supply from North America and some other non- OPEC nations such as Sudan, “Saudi Arabia is expected to curb its current high output to prevent market imbalances emerging,” Samba Financial Group, a Riyadh-based bank, said in an e-mailed report yesterday.
Oil industry inventories in developed nations rose “significantly above” their five-year average in September, to 2.7 billion barrels, the seventh gain in a row, according to the agency. That equates to about 60 days of consumption, or 0.8 days more than last month’s projection.
“A weak economic backdrop - with the global economy forecast to rise by 3.3 percent in 2012 and 3.6 percent in 2013 - continues to restrain oil demand growth throughout the forecast,” the IEA said in its report. “The so-called fiscal cliff looming in the U.S. and ongoing European debt concerns contribute to the downside risk that hangs over” demand projections for industrialized nations, it said.
Overtaking Saudi Arabia
U.S. oil output is poised to surpass Saudi Arabia’s in the next decade, making the world’s biggest fuel consumer almost self-reliant and putting it on track to become a net exporter, the IEA said it its annual World Energy Outlook yesterday.
Growing supplies of crude extracted through new technology including hydraulic fracturing of underground rock formations will transform the U.S. into the largest producer for several years starting about 2020, according to yesterday’s report.
OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Saudi Arabia is the world’s biggest crude exporter.