The International Energy Agency said Thursday that world crude-oil demand this year is now expected to fall with demand contracting for the first time in 25 years because of the global economic slowdown.
The Paris-based energy adviser to 28 developed countries including Ireland, said spare production capacity -- a key indicator of supply -- now stands at a six-year high among Organization of Petroleum Exporting Countries (OPEC) cartel members.
The IEA, in its oil-market report for December, forecast 2008 global oil demand to fall by 0.2%, or 200,000 barrels a day, to 85.8 million barrels a day on average. The outlook, a cut of over 300,000 barrels a day from November, would represent the first demand contraction since 1983.
Exactly ten years ago on Wednesday this week, the price of the North Sea's benchmark Brent crude closed at the lowest level in its history, at $9.64 a barrel. In July Brent stood at an all-time high of $147.50. This week it traded below $40.
Global oil demand is now expected to contract in 2008for the first time since 1983, shrinking by 0.2 mb/d, with the total this year revised down by 350 kb/d to 85.8 mb/d. 2009 demand will grow again to a downward -adjusted 86.3 mb/d. This forecast is based on the IMF assumption that the global economy will gradually recover from 2H09.
World oil supply growth slowed to 165 kb/d in November, averaging 86.5 mb/d, with OPEC crude supply curbed by 760 kb/d to 31.3 mb/d on weakening demand. December supplies will likely be reduced further and OPEC Ministers meet on 17 December to mull further target cuts. The ‘call on OPEC crude and stock change’ for 2009 averages 30.7 mb/d, around 0.8 mb/d below 2008.
Non-OPEC output now averages 49.6 mb/d for 2008and 50.1 mb/d for 2009, representing annualised changes of -85 kb/d and +480 kb/d respectively. But lower estimates are incorporated for 2009 Europe and the FSU (-0.2 mb/d), while the OPEC NGL forecast is also trimmed by 0.3 mb/d.
Crude oil prices dropped to nearly $40/bblin early December, amid continued signs of economic slowdown and OECD demand decline. Weak refining margins are causing economic run cuts and in turn a crude overhang, as seen in growing stocks and a widening contango.
Global 4Q08 refinery crude throughput should average 72.6 mb/d, 0.8 mb/d lower than in last month’s report, due to weaker demand and the poor margin outlook, particularly on the US Gulf Coast. Global 1Q09 crude runs are forecast to average 73.5 mb/d, a dip of 0.4 mb/d against 1Q08, driven by a 0.7 mb/d year‐on‐year decline in the OECD.
OECD industry stocks rose by 45.6 mb to 2,697 mb in October,on weak demand and post‐hurricane recovery in the US. Downward revisions to OECD demand increased end‐October forward demand cover to 56.8 days, well above the five‐year average. Preliminary November data point to another OECD stock build of 10.3 mb.
