By SARAH KENT
LONDON -- Signs of improvements in the global economy that have driven expectations of higher oil demand growth this year could be overly optimistic, the International Energy Agency said Wednesday as it revised its forecast for demand growth slightly lower.
In its closely-watched monthly report on the oil market, the Paris-based consumer watchdog cut its oil demand growth forecasts for the coming year by a marginal 90,000 bpd, but warned that recent signs of recovery in the global oil demand could be the result of one-off factors, rather than a sustained trend of improvement.
In particular, the IEA called into question the extent to which a steep increase in Chinese apparent demand at the end of 2012 could be taken as a sign of a more long-term improvement in demand.
"While higher Chinese refinery runs at that time may have responded to an actual increase in end‐user demand, they may also have led to significant product inventory builds, potentially setting the stage for a slowdown or for an increase in product exports later on," the report said.
The agency's cut in demand growth expectations for the year to 840,000 bpd follows the release last month of an update to the International Monetary Fund's World Economic Outlook in which forecasts for global economic growth were revised slightly lower for the coming year.
The IEA has already revised its estimates of global demand in the fourth quarter of 2012 down by 210,000 bpd from last month's estimates, largely as a result of lower demand from Saudi Arabia and the US.
Nonetheless, demand assessments for the fourth quarter are still nearly 500,000 bpd above estimates made in the agency's December report.
The backdrop for this cloudy demand picture remains an oil market of shifting supply and demand trends that is causing a significant disconnect in prices globally, the IEA said.
The IEA expects non‐OPEC production to rise by 1 million bpd this year, largely due to higher output from North America and parts of Asia.
But even as non-OPEC supply is seen increasing, the price of global benchmark Brent has soared thanks in part to improved economic signals in the US and China and a revival of investor appetite for stocks and commodities.
Meanwhile, the world's largest oil producers also seem to be cutting back. Supply from OPEC fell to its lowest level in a year in January, the IEA said.
Geopolitical uncertainties are also underpinning prices following on from the attack on the In Amenas gas facility in Algeria last month.
Tighter sanctions on Iran could also see supply from the Islamic Republic fall further, the IEA said.
Preliminary data for imports of Iranian crude in January show volumes fell below 1 million bpd while the IEA said production in the country is hovering below its lowest in 30 years.
"It is hard, under the circumstances, to overstate the challenges involved in bringing supply to market, which often result in unprecedented price pressures," the IEA said.
Dow Jones Newswires