The IEA boosted forecasts for world fuel consumption this year on surprising strength in China, and still anticipates a supply shortfall during the fourth quarter. But it will be roughly 30% smaller than previously projected, at about 900,000 barrels a day.
“World oil demandcontinues to exceed expectations,” the Paris-based agency said in its latest monthly report.Yet “world oil supply growth is also exceeding expectations” as “production growth in the US and Brazil has been outperforming forecasts.”
The softer outlook fits with a retreat in prices, which briefly slumped to a three-month low below $80 a barrel in London last week. Fears have abated that conflict in the Middle East will disrupt oil exports and worsen inflationary pressures, while the economic backdrop in China has darkened. World oil demand will climb by 2.4 million barrels a day this year – a shade higher than projected last month – to a record annual average of 102 million barrels a day, the IEA said. Record Chinese consumption will account for about 75% of the increase, while US fuel use drove the upgrade to the forecast.
“The macroeconomic sentiment is deteriorating – there’s a lot of concern about interest rates and slowing growth,” Toril Bosoni, head of the IEA’s oil market divisions, said. Nonetheless, “oil demand is holding up strongly and exceeding expectations, especially China going from strength to strength.”
Oil markets remain tight, with world inventories experiencing a “massive” drop last quarter equivalent to about 1.5 million barrels a day, according to the report. Yet in the final three months of the year, the upward revision to demand is only half of the 400,000 barrel-a-day boost to supplies from outside Organisation of Petroleum Exporting Countries, whittling down the resulting deficit to less than 1 million barrels a day.