(EnergyAsia, February 23 2012, Thursday) — The International Energy Agency (IEA) sees world oil demand for 2012 growing by just 800,000 b/d, down from its previous forecast of 1.1 million b/d.

In its latest monthly forecast, the Paris-based agency said slower economic growth will impact the rate of oil consumption to just 89.9 million b/d for the year. It expects the world economy to expand by 3.3%, down from its previous forecast of 4%.

Despite this downward revision in the demand outlook, the IEA noted that oil prices have remained strong.

“An uneasy balance characterised oil markets in January, with tensions surrounding Iran counteracting a weaker economic outlook. The onset of winter weather pushed prices for Brent to six-month highs in early February,” it said.

Tensions pushed oil to nine-month highs, with Brent at more than US$121 a barrel and WTI above US$106 on February 22.

The IEA said OPEC crude oil supply in January rose to 30.9 million b/d, the highest level since October 2008, on a steady ramp-up in Libyan production and sustained output from Saudi Arabia and the UAE.

It said OPEC’s ‘effective’ spare capacity is largely unchanged at 2.82 million b/d.

“Non-OPEC supply fell by 200,000 b/d to 53.2 million b/d in January on lower global biofuels output, an escalation of conflict in Syria and between Sudan and South Sudan, and continuing outages in the North Sea. North American light tight oil production and natural gas liquids (NGLs) as well as increasing production in Latin America, offset declines elsewhere, supporting an expected 900,000 b/d rebound in non-OPEC supply in 2012,” said the IEA.