(EnergyAsia, June 28 2012, Thursday) — The International Energy Agency (IEA) has reduced its June forecast for world oil demand to slightly under 89.9 million b/d for 2012, down from 90 million b/d in its previous forecast last month.

In its latest oil market report, the Paris-based agency cited the “muted economic backdrop” for its decision to slash its forecast for world oil demand to rise by 820,000 b/d, compared with 900,000 b/d previously.

While it noted further downside risks, the report mentioned that demand could also pick up as a result of summer power sector oil demand, non-OECD stockpiling and uncertainty over the US-led embargo on Iranian oil.

News reports have cited increased Chinese buying in recent weeks as both Brent and WTI crude prices have fallen to 18-month lows. According to Bloomberg, China stepped up its crude oil import at the rate of 90 million barrels in the first five months of 2012 for its fastest build-up since it took in 99 million barrels over the same period in 2008 during the preparation for the Beijing Olympics.

“The springtime slump in oil markets accelerated in May in the wake of the deepening euro zone crisis, mounting concern over a slowdown in Chinese growth and rising global oil supplies,” said the IEA.

Global oil supply kept ahead of demand, rising by 200,000 b/d to 91.1 million b/d in May with non-OPEC liquids up by 200,000 b/d to 53.1 million b/d.

For 2012, the IEA expects North American crude oil supply to continue offsetting record-low North Sea output as well as outages in the Sudans, Syria, and Yemen. It expects non-OPEC to raise supply by 700,000 b/d this year.

OPEC crude supply fell by 20,000 b/d in May to 31.87 million b/d, with reduced output from Saudi Arabia and Iraq offset by higher production in Angola, Nigeria and Libya. The IEA said the ‘call on OPEC crude and stock change’ in the second half of 2012 to rise by one million b/d from first-half levels at 30.9 mb/d.

OPEC will raise its natural gas liquids output by 400,000 b/d to 6.2 million b/d in 2012.