IEA cuts fourth-quarter oil demand forecast on Europe, Sandy

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.

Battered Coast

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.”

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