Oil and Gas

IEA Cuts World Oil Demand Growth Forecast


World oil demand will grow less quickly than expected this year because of slower economic growth in the United States, the International Energy Agency said on Wednesday.

The IEA, adviser to 27 industrialized countries, forecast in its monthly Oil Market Report that world oil demand growth would average 1.67 million barrels per day (bpd), down 310,000 bpd from its previous estimate.

"It's a big shift in demand growth," said Lawrence Eagles, head of the IEA's Oil Industry and Markets division.

"A little bit of that is due to higher demand in 2007, but the biggest chunk is because of weaker economic growth, mainly in the developed economies and particularly the United States."

While demand is slowing, risks to supply from Nigeria to Venezuela have helped oil prices rise above $92 a barrel from a dip towards $86 last month. The IEA said inventories are low and need to rise.

In the latest supply threat, Venezuela stopped oil exports to Exxon Mobil on Tuesday, escalating a fight with the U.S. company.

"Given the rapid upside recovery of prices following a resurgence of geopolitical issues in Nigeria, Venezuela, Iraq and Iran there is clearly, despite demand side risks, the need to rebuild stocks," it said.

Stockpiles in member-countries of the Organization for Economic Cooperation and Development fell by 39.5 million barrels in December, although there was some increase in January.

Weak margins prompted oil refiners to reduce crude oil processing in January and February -- the most extensive economic run cuts for five years, the IEA said.

Oil eased slightly after the report was released. Crude was down 16 cents at $92.62 a barrel.

The IEA coordinates the release of crude oil and refined product from emergency reserves in the event of a major supply disruption.

The head of the agency said on Tuesday he was concerned by Venezuela's decision to stop oil sales to Exxon and was watching the situation closely.

"We have the concern on the physical side of the event and are carefully watching," IEA Executive Director Nobuo Tanaka said.

"If there is a risk of a physical disruption we are happy to move," Tanaka said.

Related Tags