Despite recent news and statistics indicating recovery of the US economy, IEA has slightly lowered its forecast of worldwide oil demand for 2002.
In its latest report?released 3 days prior to the Organization of Petroleum Exporting Countries' meeting in which the organization agreed to maintain existing oil production quotas?IEA warned that producers need to anticipate developments in the market to avoid excessively tightening output and thereby feeding cyclical instability.
Addressing improving economic conditions, IEA said that the focus is now on the pace of a US-led recovery and that perceptions about the health of the broader economy are becoming more favorable. Recovery in gross domestic product growth combined with continued production restraint will cause the crude oil market to eventually rebalance.
Timing is the key. Should the tight market plus political uncertainty and a heightened risk of supply disruptions continue to firm prices, demand for oil products will fall in fragile economies outside the Organization for Economic Cooperation and Development, hampering the pace of a global economic recovery. "Many of these economies are also struggling with the deteriorating terms of trade due to currency devaluation, making it more expensive to purchase even the same quantity of dollar-denominated crude," the agency said.
IEA maintains flat demand outlook
While many economists are increasing their economic growth forecasts in OECD countries, IEA finds it too early to adjust upwards its estimate of oil demand growth. In addition to unseasonably warm weather this winter and unusually high US natural gas inventories, growth in the more oil-intensive sectors appears to be lagging behind the broader US economy.
IEA expects global oil demand to grow 420,000 b/d this year, a decline of 80,000 b/d from the agency's previous report. Oil demand growth was only 90,000 b/d last year. Estimates for second and third quarter 2002 demand have been raised in line with broad indicators that the US economy bottomed out sooner than had been expected; if the economic recovery is shallow, IEA expects that lower demand growth in the fourth quarter will offset these increases.
Although upward revisions to fourth quarter 2001 US economic indicators may heighten optimism about the health of the global economy, IEA noted, the implications for oil demand are less bullish. "While the assessment of US GDP growth for the fourth quarter was adjusted sharply upwards, estimates of US oil demand were revised down even more sharply, with December deliveries showing the steepest monthly decline in 12 years." This phenomenon continued in January, as preliminary data showed that oil demand contracted sharply in key US, Japanese, and German markets.
Stock levels mixed
Early estimates indicate that total oil stocks in OECD countries declined 300,000 b/d in January following a mild 400,000 b/d stock draw in the fourth quarter. Most of the January draw came from the Pacific region, which saw a strong 380,000 b/d decline in crude stocks and a modest decline in product inventories.
In North America, crude oil stocks increased 140,000 b/d, while product stocks declined. In Europe, the reverse was true as crude stocks were down 160,000 b/d, and product stocks increased 190,000 b/d.
Although OECD oil stocks declined in January, the surplus over the previous year widened to 113 million bbl. Demand cover, at 55 days, was 3 days higher than a year earlier
Author: Neftegaz.RU
