Weak Economy to Depress Oil Demand Throughout 2013: IEA

Oil field, Alberta, Canada
Norm Betts | Bloomberg | Getty Images

Global oil demand is set to be depressed by weak economic growth throughout 2013 while soaring U.S. oil production gives consumers a perfect cushion to withstand most supply outages, the International Energy Agency (IEA) said on Wednesday.

"The oil producing world today is in the midst of a once in a generation transition of farreaching consequences," the IEA, which coordinates energy policies of major consuming nations, said.

"Rarely has the market's ability to withstand crisis been so tested as in the two years since the start of the so-called Arab Spring.Yet the market seems to have taken it all - civil uprisings, terrorist attacks, natural disasters, production outages, trade embargoes - in its stride," it added.

The IEA expects non-OPEC supply to grow by 1.1 million barrels per day (bpd) in 2013 to 54.5 million bpd led by North American booming shale oil output

It said that a year-on-year gain of 1.1 million bpd in U.S. oil supply in the fourth quarter of 2012 was a record not only for that country but also for any nonOPEC producer since at least 1994.

The IEA said it remained bearish on oil demand for 2013 and trimmed its outlook for the 2013 oil demand growth by 20,000 bpd to 820,000 bpd.

"The subdued growth rate of oil demand now looks increasingly entrenched in the face of high oil prices and weak economic growth,"it said.

It said that the U.S. budget "sequester", worsening Chinese business sentiment and continued deterioration in European employment were the three economic "hits" appearing to further delay a turn around in global economic growth.

The IEA also expects Iranian oil exports to hold strong and even exceed 1.4 million barrels per day in March.

"New U.S. sanctions implemented in February, which bar Iran from repatriating earnings from its oil exports, appear not to have had an impact on February shipments," the IEA said in its monthly report.

The sanctions are part of a stand-off between the West and Iran over Tehran's nuclear program and are aimed at curbing Iran's revenues.

Iranian exports fell below 1 million bpd during several months in 2012 from around 2.5 million bpd in 2011. They have rebounded above 1 million bpd in 2013.

Industry sources told Reuters on Tuesday that Iran's exports in March may plunge by a quarter from a month earlier to the lowest since Western sanctions came into effect in 2012.