IEA cuts 2006 oil demand growth estimate, 2007 demand growth forecast UPDATE |
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Published
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Thu, 18 Jan 2007 11:49
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(adds detail on reasons for cuts)LONDON (AFX) - The International Energy Agency cut its 2006 world oil demand growth estimate and lowered its forecast for 2007 oil demand growth, citing large revisions to US data, mild weather and adjustments US GDP assumptions.In its monthly report, the agency also noted the recent steep fall in oil prices, saying it was aided not only by fund selling, weak demand and mild weather but also, ironically, by OPEC's attempts to rebalance the market.OPEC cut its output by 1.2 mln bpd last November and has also agreed to cut output by a further 500,000 bpd on Feb 1. However, according to the IEA, cartel members have shown poor levels of compliance with the cuts.Compliance aside, the IEA said the output cuts themselves have had the counter-intuitive effect of signalling to the market there is spare capacity around.'So ironically, the restart of output restraint by OPEC offers proof to consumers that there is marketable spare capacity in the system and this exerts downward pressure on prices,' the IEA said.It warned, however, the spare capacity cushion might not last long as energy stockpiles have been falling despite the mild winter temperatures. Stockpiles in OECD countries fell by 1.1 mln bpd in the fourth quarter.'If stocks continue on a declining path, at some point market tightness will push spot prices higher,' said the IEA.It added that OPEC is mindful of the high levels of spare capacity built up in the 1980s and 90s and that should it defer future expansion plans because of a fall in spot prices, spare capacity may be tight for some time.While tight spare capacity would support oil prices, for now, the mild winter temperatures, weak demand, fund selling and OPEC's own lack of compliance with its cuts are keeping prices under pressure.Under these conditions, the IEA's lower demand forecasts for this year can only work to further pressure prices.The agency said it now sees 2007 oil product demand growing by an annual 1.6 pct to total 85.8 mln bpd - representing a 160,000 bpd downward revision from its previous forecast.For 2006, the IEA estimates oil product demand grew by 0.9 pct last year to total 84.4 mln bpd - representing a downward revision of 120,000 bpd from previous estimates.maytaal.angel@afxnews.comma/rarCOPYRIGHTCopyright AFX News Limited 2006. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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