Global oil demand is likely to be muted over the next year and supply and inventory levels look comfortable, the West’s energy agency said on Wednesday, implying there is no need to release emergency stocks to curb oil prices.
The United States has been considering an emergency stocks release to help suppress high oil prices, and other members of the International Energy Agency (IEA) such as France and Britain could join the move.
But the IEA, which represents developed energy consuming countries, and the European Union, led by Germany, have opposed a coordinated release of stocks, saying the market does not face a supply crunch.
The IEA’s monthly oil market report on Wednesday implied such a release would be unnecessary.
The agency said global oil demand would grow at a steady rate of around 800,000 barrels per day (bpd) or 0.9 per cent in both 2012 and 2013, little changed from its previous assessment.
“This modest growth rate reflects the combined effects of sluggish global economic activity, historically elevated oil prices and global improvements in energy efficiency,” it said.
“On a forward demand basis, inventory cover looks more comfortable, due mostly to diminishing demand prospects.”
The IEA said the Organization of the Petroleum Exporting Countries (OPEC), which pumps around a third of the world’s oil, produced 45,000 bpd more oil in August at 31.55 million bpd, due to increases in Angola, Nigeria, Iraq, UAE and Ecuador.
The increase in OPEC supply failed to offset fully unplanned production outages in non‐OPEC countries.
But compared to a year ago, global oil production stands 2.0 million bpd higher due to increases from OPEC, which is pumping way above the levels required by the market and therefore contributing to a large stocks build across the world.
The IEA report reinforced the conclusions of an OPEC report on Tuesday, and comments by Saudi Arabia’s oil minister on Monday, saying the producer group was supplying plenty of crude oil to world markets.
This view is supported by independent analysts, who argue growing oil stocks should eventually curb prices.
Oil prices have risen by almost a third over the last three months and global benchmark Brent crude is now around $116 per barrel, well above the cost of oil supply from all the world’s biggest producer regions.
Olivier Jakob, energy market consultant at Petromatrix in Zug, Switzerland, said recent surges in oil prices would help depress demand eventually.
“This demand destruction is not factored in yet,” he said.
The IEA said the call on OPEC crude and stock change was projected to rise by 1.3 million bpd in the third quarter of 2012 to 31.1 million bpd due to a seasonal quarter-on‐quarter uptick in demand of 1.4 million bpd.
However, a projected recovery in non‐OPEC supplies in the fourth quarter of 2012 is forecast to cut back the ‘call’ on OPEC by a substantial 0.5 million bpd to just 30.6 million bpd versus its current output of 31.55 million bpd.
Oil prices have rallied due to expectations of a new round of monetary easing in the United States and on tension between Iran and the West over Tehran’s nuclear programme.
The IEA said Iranian oil exports inched up in August to 1.1 million bpd from below 1 million bpd in July.
“China, South Korea, India and others are poised to increase liftings in September. In addition, a cargo was reportedly sold through the private sector after Tehran, in a bid to maintain exports, allowed for the first time sales outside of the state oil company,” the IEA said.
Increased exports, however, may be temporary, it added as both U.S. and European officials have proposed to tighten sanctions further due to lack of progress in negotiations with Tehran over its nuclear programme.
The IEA said OECD industry crude stocks looked sufficient when measured against likely forward consumption.
“Low expectations of future demand are such that the OECD stock cushion actually looks more comfortable today when measured in days of forward demand.”