Fears over the pace of the global economic recovery prompted the International Energy Agency (IEA) to warn of a sharp slowdown in the growth of oil demand yesterday.
The agency's monthly oil reportrevealed demand growth shuddering to a halt in June as high prices and slowing economic growth "dramatically curbed" energy needs worldwide.
"The relative calm of oil markets in July was shattered by the collapse in global financial and commodity markets in early August," the IEA said.
"The spectre of a sharp slowdown in economic growth near term, particularly in the US, is prompting some industry forecasters to cut global oil demand estimates for this year and 2012," the agency added, pointing to high oil prices, sovereign debt and fiscal uncertainty sapping consumer confidence in the developed world, and anti-inflationary monetary tightening in developed economies.
So far, the IEA itself has made only minimal adjustments to its headline forecasts. Yesterday, it cut this year's estimate by 60,000 barrels per day (bpd) to 89.5 million bpd, largely on the basis of the weaker appetite in evidence in China and the US. And next year's estimates were even tweaked slightly higher – up by 70,000 bpd to 91.1 million bpd – on the expectation of rising need from post-tsunami Japan.
However, in response to "emerging economic storm clouds", the IEA has sketched out a scenario of lower global GDP growth which slashes 2012 oil demand growth by more than half. In such a case, the call on crude from the 12-country Opec oil producers' cartel would drop below 30 million bpd, the IEA said.
The drop in demand is alreadyhaving a marked impact. Oil prices have dropped by as much as $15 since the beginning of this month alone, and are set to slide lower still.