Demand for oil remains largely unscathed,the International Energy Agency (IEA) said in its monthly oil outlook on Wednesday, despite volatility which has seen prices plunge for the third time in three months.
“Concerns over debt levels in Europe and the US, and signs of slowing economic growth in China and India have spooked the market and raised fears in some quarters of a double dip recession” the IEA said.
“From an oil market standpoint, perceived wisdom is that this must inevitably mean weaker oil demand to come,” said the report.
But in the agency's own base case the "demand trend remains remarkably unscathed, partly since our view of 2011 demand growth was already below that of some of our peers,” said the IEA.
It added policymakers seemed "rather less concerned with price volatility when it is to the downside”.
Slower demand in China and the US will be offset by higher demand in Japan following the nuclear crisis earlier this year, according to the IEA.
Noting that the risk to its growth and demand assumptions were high, the IEA, which represents the oil-consuming nations of the OECD, chose not to extend its intervention in the market.
Earlier this year when prices soared, the IEA released 60 million barrels in order to push prices lower.
That move did help push prices lower and the market volatility of the last few days has removed the need for the IEA to intervene again as prices of both Brent and WTI are well off recent highs.
The IEA though said it remained vigilant.
“August has a habit of springing both geopolitical and meteorological surprises, so the big dipper ride may still have further to run,” said the IEA.