IEA cuts oil demand forecasts, but sees prices staying high
London, UK - The International Energy Agency (IEA) cut forecasts for oil demand this year and next because of growing threats to global economic growth, yet warned that dwindling spare oil supplies will keep prices high.
Reduced growth estimates from the International Monetary Fund, trade disputes and the strain of high oil prices all fed into the downgrade to consumption, the Paris-based IEA said in its monthly report. Yet as supply losses deepen in
OPEC members Venezuela and
Iran, the level of spare production capacity left elsewhere amounts to just two per cent of global demand and will likely shrink further, it said.
‘Expensive energy is back’ and ‘it poses a threat to economic growth’, said the IEA, which advises most major economies. ‘For many developing countries, higher international prices coincide with currencies depreciating against the US dollar, so the threat of economic damage is more acute’.
Oil climbed to a four-year high above US$85 a barrel in London last week on concern that looming US sanctions on Iranian crude exports will leave markets short of supply later this year.
The IEA cut its estimate for global oil-demand growth for both 2018 and 2019 by about 110,000 barrels a day to 1.3mn and 1.4mn barrels a day respectively. The revision also reflected changes in the way the agency assesses Chinese consumption. Both global demand and supply are close to hitting 100mn barrels a day for the first time.
The latest report showed that Saudi Arabia and other key nations in the Organization of Petroleum Exporting Countries are already delivering to make up for fellow members who are suffering losses. Producers in the so-called OPEC+ coalition, which also includes Russia, have added 1.6mn barrels a day since May, the report showed. As a result, inventories have been replenished and it appears ‘that the oil market is adequately supplied for now’, the agency said.
The amount available will almost certainly be tested in the coming months as US sanctions take effect on Iran, which has already seen supplies fall to the lowest in more than two years, according to the report.
‘This strain could be with us for some time and it will likely be accompanied by higher prices, however much we regret them and their potential negative impact on the global economy’.
Both global demand and supply are close to hitting 100mn barrels a day for the first time