IEA trims estimate for 2014 global oil demand growth on economy

The International Energy Agency trimmed forecasts for global oil demand growth in 2014 amid slowing expansion in China and a struggle to secure a recovery in the U.S. and Europe.

Global consumption will increase by 1.1 million barrels a day, or 1.2 percent, to 92 million next year, the Paris-based adviser to energy-consuming nations said today in its monthly market report. The expansion is 100,000 barrels a day less than last month, when the estimate for 2014 was first introduced. Refinery operating rates will ease after a record surge in July, the IEA said.

“Everyone knows that supply is growing faster than demand into next year and the overall perception is that prices will soften,” Bjarne Schieldrop, chief commodity analyst at SEB AB in Oslo, said by phone before the report. “We’re not really finding a big bullish driver for oil.”

Brent crude lost about 4 percent this year, trading near $107 a barrel today on the ICE Futures Europe exchange in London, amid deceleration in China and elevated unemployment rates in the U.S. and Europe. The IEA’s outlook incorporates lower projections from the Washington-based International Monetary Fund, which on July 9 cut global economic growth forecasts next year to 3.1 percent from 3.3 percent.

Strength Signs

There have been recent “signs of strength” in oil markets with a 3.1 million barrels a day surge in world refinery operating rates in June and demand recovery in the U.S., the IEA said.

Demand for crude produced by the Organization of Petroleum Exporting Countries will shrink by 400,000 barrels a day next year to 29.4 million a day as higher output from other nations, such as the U.S. and Canada, exceeds the expansion in global oil consumption, the agency said.

Production from OPEC’s 12 members fell by 165,000 barrels a day last month to 30.41 million a day, the lowest in six months, amid supply disruptions in Libya and Iraq, according to the IEA. The North African nation’s output slipped to 1 million barrels a day, while the Persian Gulf state’s fell to 2.99 million. Supplies from Saudi Arabia, the group’s biggest member and de facto leader, increased by 150,000 barrels a day in July to a one-year high of 9.8 million.

The decline still leaves OPEC output about 400,000 barrels a day higher than the amount the IEA estimates will be needed from the group in the third quarter, and the organization’s own formal target, at 30 million a day. OPEC, which accounts for about 40 percent of global supplies, will meet next to review production targets on Dec. 4.

Non-OPEC Supply

The agency kept estimates for supplies from outside the group in 2014 unchanged. Non-OPEC producers, led by the U.S., Canada and Brazil, will bolster production by 1.4 million barrels a day, or 2.6 percent, next year to 55.9 million a day.

The IEA also kept its projection for world oil demand in 2013 mostly unchanged. Consumption will rise by 895,000 barrels a day this year to 90.8 million, amounting to a reduction of 70,000 barrels a day from last month’s report.

Total inventories of crude and refined products in industrialized nations were above their five-year average after increasing in June, the agency said. Stockpiles in members of the Organization for Cooperation and Development rose by 11.9 million barrels to 2.7 billion in June, leaving them 39 million barrels above the mean.