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News : Global Economy Last Updated: Apr 13, 2011 - 6:02 AM

International Energy Agency maintains outlook for global oil demand but warns of impact of $100+ oil
By Finfacts Team
Apr 12, 2011 - 4:28 PM

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The International Energy Agency, the Paris-based watchdog of 28 industrialised nations including Ireland, today maintained its outlook for global oil demand in 2011, while warning that prices above $100 a barrel are beginning to hurt the global economy.

Worldwide oil consumption will rise by 1.4m barrels a day, or 1.6%, this year to average 89.4m a day, the agency said in its in its monthly Oil Market Report. It added that preliminary data “already show signs of oil demand slowdown,” and global supplies are starting to look “thin” as the conflict in Libya puts pressure on oil cartel OPEC members’ spare production capacity, the IEA said.

“There are real risks that a sustained $100-plus price environment will prove incompatible with the currently expected pace of economic recovery,” the agency said.
“The surest remedy for high prices may ultimately prove to be high prices themselves.”

Highlights of the latest OMR

Spot crude oil prices jumped 10-15% in March, as outages from Libya and mounting unrest in the MENA (Middle East North Africa) region offset a seasonal drop in refinery runs. At writing, Brent futures stood near $126/bbl, with WTI at $112/bbl. Refining margins, notably for light, distillate-rich grades, remained weak as crude price gains outstripped those for products.

Global oil output fell 0.7 mb/d to 88.3 mb/d in March on reduced Libyan crude supply. Non-OPEC production rose 0.2 mb/d to 53.3 mb/d, even as unrest and strikes in Yemen, Oman, Gabon and Ivory Coast shuts in an average 0.1 mb/d of crude in March and April. Non-OPEC 2010 supply is left at 52.8 mb/d, while stronger Canadian production lifts the outlook by 0.1 mb/d to 53.7 mb/d for 2011.

OPEC crude supply fell by 890 kb/d in March to 29.2 mb/d, on a near-70% drop in Libyan output. Effective OPEC spare capacity stands at 3.91 mb/d, with Saudi Arabia accounting for 3.2 mb/d. The ‘call on OPEC crude and stock change’ is cut by 0.4 mb/d for 1Q11 to 29.8 mb/d. The average ‘call’ for 2011 is also 29.8 mb/d, unchanged from 2010 but 0.6 mb/d above March OPEC production.

Global product demand remains unchanged for 2010 and 2011, at 87.9 mb/d (+2.9 mb/d year-on-year) and 89.4 mb/d (+1.4 mb/d) respectively. Higher anticipated post-earthquake Japanese oil use for power generation and reconstruction offsets downward non-OECD adjustments. Preliminary January and February data suggest that high prices are already starting to dent demand growth.

OECD industry stocks fell by 50.8 mb to 2 676 mb, or 59.2 days, in February, driven by sharp product draws due to seasonal refinery turnarounds. March data point to an 8.1 mb draw in US and European inventories, while oil held in short-term floating storage rose.

Global crude run estimates are lowered by 270 kb/d for 2Q11, largely due to the Japanese earthquake. Offsetting factors, in Japan and elsewhere, could mitigate the impact of a continuing loss of about 600 kb/d of refining capacity into 2Q. In all, global runs are seen averaging 74.5 mb/d in 2Q11, down from 74.6 mb/d in 1Q11.

IEA Oil Market Report

"Generally speaking, we are in a secular bull market for commodities and there are going to be ups and there are going to be downs and we very well may be entering one of the downs,"
Dan Greenhaus, chief economic strategist at Miller Tabak said in response to an IEA oil market report suggesting spiraling oil prices would be cured by high prices.

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