Demand growth in the oil markets will be more subdued than previously expected, according to the International Energy Agency, which has once again downgraded its projections for the rest of the year.
"The recent slowdown in demand growth is nothing short of remarkable," the IEA said in a new monthly report on Thursday morning. "While demand growth is still expected to gain momentum, the expected pace of recovery is now looking somewhat more subdued."
Its latest statistics show that demand growth slowed to below 500,000 barrels per day (b/d) in the second half of 2014 on a yearly basis. This was its lowest level in two and a half years, it added, leading the organization to revise demand projections downwards for the third quarter.
Additionally, global oil demand growth for has been lowered to 900,000 million b/d in 2014 and 1.2 million b/d for 2015. The pronounced slowdown in demand growth and a weaker outlook for Europe and China underpinned these changes, it said. In August, the IEA lowered its forecast for 2014, to 1.0 million b/d.
"While festering conflicts in Iraq and Libya show no sign of abating, their effect on global oil market balances and prices remains muted amid weakening oil demand growth and plentiful supply," it said in the report.
"U.S. production continues to surge, and OPEC (Organization of the Petroleum Exporting Countries) output remains above the group's official 30 million b/d supply target."
The euro zone was singled out for particular attention, with the IEA saying that the "macroeconomic malaise" experienced across much of Europe has been the dominant downside influence in terms of global demand. Euro zone economies are getting perilously close to deflation, it said, where consumer prices stop growing and instead start falling.
"The risk being that falling European prices trigger a deflationary spiral that causes further reductions in economic activity, as market participants delay investment/purchasing decisions, which in‐turn curb production and overall economic output," it said.
Brent crude, the international benchmark, fell through $100 for the first time in 16 months Monday, and was trading at $97.65 on Thursday morning. West Texas Intermediate is also under pressure, falling to $91.45 per barrel on Monday, trading near levels not seen since May 2013.