The International Energy Agency trimmed demand forecasts for OPEC’s crude in the second half of the year amid signs of slowing growth in China as output from the producer group rose to a seven-month high.
The Organization of Petroleum Exporting Countries will need to provide an average 29.8 million barrels a day in the second half, the IEA said today in its monthly market report, lowering its assessment from the previous report by 200,000. That would require OPEC to cut output by 1.1 million barrels from the 30.9 million it pumped in May, according to the report. The agency kept its global oil demand estimates for this year unchanged.
“While Europe’s economic woes are taking a toll on demand, there are mounting signs that China’s oil use, like its economy, may have shifted to a lower gear,” the Paris-based adviser to 28 oil-consuming nations said.
Brent crude has lost almost 8 percent this year, trading today at $102 a barrel on the London-based ICE Futures Europe exchange, as economic stagnation in Europe, slowing expansion in China and threats to recovery in the U.S. constrain fuel consumption. OPEC pledged at its most recent meeting on May 31 to restrain excess production.
Global oil demand will increase by 785,000 barrels a day, or 0.9 percent, to 90.6 million a day as “relatively sluggish macroeconomic conditions are expected to keep a lid on growth,” the IEA said. While China will still account for about half of global growth, the agency curtailed projections for the world’s biggest energy user, forecasting that Chinese demand will rise this year by 365,000 barrels a day to 9.96 million, or 15,000 less than anticipated last month.
“The global picture drawn by the IEA has stayed the same, one of relatively slow demand growth and ample supply,” Olivier Jakob, managing director at Petromatrix GmbH, a consulting company in Zug, Switzerland, said by phone yesterday of the agency’s earlier forecasts this year. “The picture has been confirmed by the micro supply and demand conditions and price action in the market.”
OPEC, responsible for 40 percent of global supplies, boosted production by 135,000 barrels a day to 30.9 million a day last month as higher output from Saudi Arabia, Iran and the United Arab Emirates compensated for lower supplies from Iraq, Libya and Nigeria.
Saudi Arabia increased daily production by 220,000 barrels to a six-month peak of 9.56 million to meet higher domestic power consumption for air conditioning units, the report showed.
The agency kept its assessment of supplies outside OPEC in 2013 unchanged. Non-OPEC producers led by the U.S. and Canada will bolster output by 1.1 million barrels a day this year to 54.5 million a day.
OPEC yesterday kept its estimate for global demand for this year unchanged. The group projects consumption will increase by 780,000 barrels a day, or 0.9 percent, this year to 89.7 million a day, or about 900,000 a day less than the IEA.
Total inventories of crude and refined products in industrialized nations are at a “marginal” surplus compared with their five-year average, having increased by 16.7 million barrels in April to 2.68 billion, according to the IEA.