Slow global oil demand recovery on track: IEA

Slow global oil demand recovery on track: IEA

Tom Ashby Reuters London

The West's energy watchdog said on Friday a slow recovery in global oil demand was on track, despite the recent slump in equities markets.

The International Energy Agency (IEA) said it expected demand to jump sharply in the fourth quarter this year, even though its performance so far this year has been sluggish.

"However slow the recovery in oil demand may appear, it is still on track," the IEA said in its monthly Oil Market Report.

The Paris-based agency, an arm of the Organization for Economic Co-operation and Development (OECD), trimmed its estimate for demand growth this year by 50,000 barrels per day (bpd) to 200,000 bpd.

"This adjustment reflects lower-than-expected statistical estimates of actual demand for the first half of the year and weak preliminary U.S. data for July, but leaves the forecast of demand growth for the remainder of the year unchanged," the report said.

From the third to the fourth quarter of this year, the IEA expects global oil demand to jump by 1.9 million bpd, as the arrival of winter in the northern hemisphere coincides with economic recovery.

Last month, the IEA saw a 1.6 million bpd jump.

In the same interval last year, demand grew by just 900,000 bpd as the September 11 attacks on the United States caused a demand shock, particularly for aviation fuel.

For 2003, the IEA forecast annual demand growth of 1.11 million bpd, the fastest expansion in four years.

This growth forecast was unchanged from the previous month, although all the IEA's absolute demand figures were raised due to a statistical revision for non-OECD countries dating back to 1991.

The impact of the equity market slide on oil demand was unclear, and may be marginal, the agency said, although it did increase the downside risk to demand forecasts.

Demand in the industrialized world contracted in the first half of the year, but the deficit narrowed in the second quarter. The IEA said it still expects the United States, the world's largest consumer, to lead a global demand recovery, despite a dip in July.

"The dip in U.S. demand in July, which had been expected in our previous forecast, reflects in part the relative strength of U.S. deliveries that month a year earlier, and should lead to resumed growth in August," the report said.

The United States burns one in every four oil barrels consumed worldwide.

U.S. demand for gasoline and diesel has already moved into positive territory, while jet fuel is unlikely to recover to pre- September 11 levels for the foreseeable future because of airline efficiency gains, the IEA said.

Despite the weak demand growth, oil inventories in the industrialized world grew at below their five-year average in the second quarter of the year, the IEA said.

A series of curbs on OPEC output has created a total of 6.5 million barrels per day of spare production capacity in the cartel of mostly Middle Eastern countries, the IEA said. The figure includes almost a million bpd of idle capacity in sanctions-bound Iraq, which is in a pricing dispute with the United Nations.

The Organization of the Petroleum Exporting Countries is due to meet on September 19 to decide on output for the fourth quarter, and cartel insiders expect it to relax current tough curbs.