Paris: Global thirst for oil will be slightly stronger than expected in the last quarter of this year and in 2013 largely because of rising demand in China and despite a sharp cutback in Europe recently, the IEA forecast on Wednesday.
It revised slightly up its outlook for demand next year but said the trend would be “relatively sluggish” against a background of “tepid” growth of the global economy and despite signs that “Chinese sentiment has turned mildly positive.”
The International Energy Agency raised its estimate for global demand in the last three months of the year by 435,000 barrels per day to 90.5 million barrels per day.
This led it to increase fractionally its estimate for demand growth for all of 2012.
This was despite latest European data indicating “the steepest contraction” of demand in the third quarter since the financial crisis of 2008-2009.”
The agency also underlined that “US demand has been on a structural decline since late 2005.”
The growth of global demand in 2013 was now put at 865,000 bpd, taking consumption to 90.5 mbd or 110,000 bpd more than forecast last month.
This outlook remained based on expectations that the global economy would grow by 3.3 percent in 2012 and by 3.6 percent in 2013, as estimated by the International Monetary Fund.
World oil prices extended gains in Asian trade Wednesday on supply concerns after the OPEC cartel reported a drop in crude production last month.
New York’s main contract, West Texas Intermediate for delivery in January, was up two cents to $85.81 in the afternoon, and Brent North Sea crude for January added 24 cents at $108.25.
The IEA, the energy arm of the Paris-based Organisation for Economic Cooperation and Development grouping 34 advanced economies, said that five of the 10 biggest oil consuming countries in the world were now countries outside the OECD area.
The United States remained the biggest consumer, accounting for 18.2 mbd, nearly twice as much as number two China which consumed 9.8 mbd.
But Brazil, Russia and India, and Saudi Arabia, were four of the next five biggest users of oil. Like China, they are all non-OECD member states.
Japan ranked third, consuming 4.4 mbd.
The top 10 consumers accounted for about 60 percent of global demand in September. OECD countries together accounted for about 50 percent.
The IEA stressed in its monthly review of the oil market that beneath the surface of apparently “calm” trading conditions, tectonic changes were taking place in the structure of energy markets, adding to uncertainty.
The market was undergoing “almost violent structural change” on two fronts.
These were “an apparent acceleration in the eastward shift of global oil demand growth”. It said: “Emerging markets continue to dominate growth, a trend that has become deep rooted having commenced around the turn of the millennium.”
And the second was accelerating globalisation of the refining industry.
“End-user markets are globalising. No longer is refining a local industry. Exports are what’s driving throughputs in Europe and the US in the face of local demand contraction,” the IEA said.
“Until recently the largest product importer, the US has become the world’s second largest exporter after Russia, which recently hit record-high runs. India, another product exporter, is also on the rise,” the report said.
The agency said that global demand had risen to 90 mbd in the third quarter and that it was raising its forecast for the fourth quarter by about 435,000 bpd from the level foreseen last month to about 90.5 mbd.
The revision had been driven by unexpectedly strong deliveries of products in Mexico in October and “signs of stronger implied demand in China” together with “surprisingly robust data for Germany.”
This latest estimate meant that the growth of global demand in 2012 from the level in 2011 would amount to about 850,000 bpd or 0.9 percent, an increase of 70,000 bpd from the estimate made last month.
But the agency also highlighted that demand from OECD countries in Europe “plummeted by 895,000 bpd year-on-year in the third quarter, to 13.8 mbd.”
It said: “This was the steepest contraction in OECD European demand since the onset of the 2008-2009 financial crisis, and apparently resulted from the combination of near-record product prices and a weak economy.”
But the slowing of demand in Europe was expected to ease up as the economic climate improved, even if this was a slow process.
Weak demand in Europe in the third quarter had been partly offset by robust demand in Asia.
In Europe, “recessionary economic conditions” had curbed consumption and weakness of the euro had pushed up the price of oil products which were based on the dollar pricing.
The IEA, created as a result of the oil shocks in the 1970s to advise OECD governments on energy policies, to monitor energy markets and to oversee strategic stocks, said that the “deep, complex and challenging shifts in market structure” were among factors which could make management of the oil market an even more “elusive” goal than previously for the Organization of Petroleum Exporting Countries (OPEC).
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