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Europe’s weak growth, China’s slowdown dent demand for oil
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DEMAND for oil is feeling the squeeze of weak growth in Europe, slowdown in China and abundant supplies, the International Energy Agency said yesterday.
Shale oil from North America continues to change the global energy landscape, and shipments from OPEC countries are shifting increasingly eastward, from routes to the United States toward Asia.
And output from the Organization of Petroleum Exporting Countries remains plentiful despite conflict in Iraq and unrest in Libya.
All these factors help explain why the price of oil has fallen below US$100 a barrel, the IEA said in its monthly review of the oil market.
The growth in demand for oil this year and next will be markedly lower than expected, the agency said.
The IEA’s report helped push the price down further by 46 cents to US$91.21 for benchmark West Texas Intermediate oil for October delivery, in mid-day trading.
Weakness in economies
“The recent slowdown of demand growth is nothing short of remarkable,” the IEA said.
Also, “OPEC demand has been remarkably robust in view of the troubles in Libya and Iraq.”
The agency attributed the “clear slowdown” in demand growth to “ongoing weakness in both European and Chinese economies, coupled with lower-than-expected oil deliveries in Japan and Brazil.”
Recent economic “malaise” across much of Europe “has been the dominant downside influence” on the oil market, it said, with the eurozone “struggling with stagflation” and “getting perilously close to deflation.”
Meanwhile, growth of demand for oil in China was “anaemic.”
Compensating in part for this slowdown was an increase in overall deliveries to the United States.
The IEA cut its estimate for oil demand this year to growth of 1 percent or to 900,000 barrels per day, from a previous estimate of 1.1 percent or 1 million barrels per day.
That takes total demand for the year to 92.6 mbpd.
In the second quarter of this year, growth of demand fell to the lowest rate for two and a half years to about 480,000 bpd from the level in 2013.
“Eurozone economic growth is petering out, while US petrochemical usage fell alongside pronounced declines in Japanese power-sector demand,” the IEA said.
The agency “tempered” its outlook for 2015 to growth of 1.2 mbpd from 1.3 mbpd forecast previously.
This update put global deliveries at 93.8 mbpd, or about 165,000 bpd less than previously forecast.
But this would still amount to a “notable” acceleration of demand from the level in 2014, the IEA said.
“While demand growth is still expected to gain momentum, the expected pace of recovery is now looking somewhat more subdued.”
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