(EnergyAsia, October 3 2014, Friday) — The International Energy Agency (IEA) expects global oil demand growth to weaken over the next two years even after Brent crude’s sustained weak run below US$100 a barrel.
Instead of inducing fresh buying, the oil market’s collapse — as Brent dipped below the US$100-mark for the first time since mid-2003 — is scaring off customers who believe prices could go lower. The worsening state of geopolitical tensions and conflicts around the world failed to lift sentiments in what increasingly looks like an oversupplied market that has pushed front‐month Brent futures below US$100 per barrel for the first time in a year..
In its September report, the International Energy Agency (IEA) scaled back its forecast for global oil demand to 92.61 million b/d for 2014 and to 93.84 million b/d for 20145. In August, it had expected global oil demand to reach 92.68 million and 94 million b/d for the two respective years.
“Oil prices fell sharply in August, weighed down by abundant supplies and further indications of slow global economic and oil–demand growth,” it said in explaining its reduced growth forecasts.
“A pronounced slowdown in demand growth in 2Q14 and a weaker outlook for Europe and China underpin the downward revisions.”
Rising supplies, particularly from North America, have played a major role in dousing fears of any shortages that might arise from the festering conflicts in Iraq, Libya and Syria along with the growing tensions between Russia and the West.
The IEA noted that the Brent futures market has shifted into contango (forward prices higher than current), providing traders with an incentive to build stocks. As supply risks remain elevated, market participants are reportedly building up stockpiles against potential disruptions in Saldanha Bay in South Africa and Fujairah in the Persian Gulf.
Within the OECD, data show a seasonal build in total oil stocks of roughly 15 million barrels in July and a provisional build of nearly 20 million barrels for August, twice the monthly average. Clearly the price structure encourages further builds. Given the volatile situation in the Middle East and North Africa region, the IEA calls the stockbuilds a benefit to global energy security.
For now, however, it notes that there are no signs yet of a large build‐up in commercial inventories elsewhere.
September 2014
2013 2014 2015 2015/2014
Americas 24.08 24.11 24.17 0.25%
Developing Asia 21.93 22.50 23.21 3.16
MidEast 7.89 8.11 8.34 2.84
Latin America 6.62 6.78 6.92 2.06
Former SU 4.73 4.80 4.87 1.46
Africa 3.84 3.97 4.16 4.79
Others 22.62 22.34 22.17 -0.76
TOTAL 91.71 92.61 93.84 1.33%
August 2014
2013 2014 2015 2015/2014
Americas 24.02 24.07 24.10 0.12%
Developing Asia 21.90 22.53 23.31 3.46
MidEast 7.90 8.12 8.37 3.08
Latin America 6.62 6.79 6.93 2.06
Former SU 4.73 4.78 4.84 1.26
Africa 3.84 3.97 4.16 4.79
Others 22.62 22.42 22.29 -0.58
TOTAL 91.63 92.68 94.00 1.42%
July 2014
2013 2014 2015 2015/2014
Americas 24.01 24.12 24.14 0.08%
Developing Asia 21.82 22.50 23.31 3.60
MidEast 7.97 8.19 8.45 3.17
Latin America 6.61 6.78 6.93 2.21
Former SU 4.61 4.69 4.77 1.71
Africa 3.71 3.88 4.06 4.64
Others 22.71 22.51 22.42 -0.40
TOTAL 91.44 92.67 94.08 1.52%