Global demand for oil will not fall as far as expected this year, although fears of a double-dip recession still dampen optimism, the International Energy Agency (IEA) said yesterday.
Stronger than anticipated demand in China and the US in recent weeks has left the estimate of how far oil consumption will fall in 2009 at 1.9 million barrels per day (bpd) – some 400,000 bpd lower than last month's forecast, which was itself revised down by 200,000 bpd from the July total.
The world's thirst for oil is now expected to be 84.4 million bpd in 2009 – some 2.2 per cent lower than last year – but it is likely to rise again by 1.3 million bpd to 85.7 million bpd next year, analysts say.
"There is growing evidence that the global economy may be finally stabilising, with industrial destocking coming to an end, coupled with the effects of large scale government intervention," the watchdog added yesterday.
But despite the upwards revisions on the strength of improving economic data, the IEA counselled against placing too much reliance on a smooth recovery. "The spectre of a double dip, W-shaped recession, which would undermine oil demand growth next year, cannot be entirely discounted," it said.
Even in the newly optimistic climate, demand from OECD developed economies is still expected to fall by 4.7 per cent this year, and only grow by a margin of 0.1 per cent in 2010. And although non-OECD oil consumption is now expected to grow by 400,000 bpd this year – a 220,000 bpd upwards revision – lack of clear data about Chinese inventory levels makes for an uncertain prognosis. The massive government stimulus has boosted demand but attempts to account for stock-building may overstate the case, the IEA said.
The more bullish economic data coming out of the US may also prove illusory. Although petrol demand bounced briefly in July – possibly the result of more stay-at-home driving holidays – consumption of diesel has continued to decline at double-digit rates. "There is considerable uncertainty regarding the prospects of a sustained US economic recovery," the IEA added.
There are also supply-side explanations for the falling inventory levels, according to Malcolm Fraser, of the energy consultancy McKinnon and Clarke. "This summer's hurricane season has been relatively light and has not really hit supplies from the Gulf of Mexico," Mr Fraser said. "As a result, the volume of imports has been relatively low."
The new predictions from the IEA came just a day after the cartel of oil producing countries agreed to hold production at current levels. Opec has cut its production target by 4.2 million bpd since last autumn in an effort to put a floor under the oil prices as it plummeted from July 2008's $147 per barrel high to little more than $30 in December. In recent weeks the price has hovered around the $70 mark.