The International Energy Agency on Tuesday again cut its forecasts for global oil demand growth for 2014 and 2015 on continuing weaker expectations for world economic growth, but said there were signs of recovery and that demand was not as "dismal" as it might appear.
In its latest monthly oil market report, the IEA revised down its demand growth forecast for this year by 250,000 b/d to 700,000 b/d compared with the previous month's report, while it trimmed its estimate for 2015 by 90,000 b/d to 1.13 million b/d.
"Annual demand growth for the year is now projected at 250,000 b/d less than previously forecast in line with reduced expectations of economic growth," the IEA said.
"Specific economic concerns regarding Europe, China and Russia act as a drag on the forecast," it said.
It said it had reduced its estimate of Chinese oil demand growth for 2014 to 2.3% compared with 2.4% in last month's report.
"Expectations of weaker, albeit still rising, economic growth have similarly trimmed the 2015 [China] forecast, by 50,000 b/d over last month's report, to 10.6 million b/d," it said.
The IEA also cut its estimates of the "call" on OPEC crude for the fourth quarter of 2014 by 300,000 b/d to 30.3 million b/d and for 2015 by 200,000 b/d to 29.3 million b/d.
It reduced the call on OPEC for Q1 next year by 100,000 b/d to 28.8 million b/d and for Q2 2015 by 200,000 b/d to 28.7 million b/d.
For the third and fourth quarters of 2015, it cut the call by 400,000 b/d and 300,000 b/d to 29.9 million b/d and 29.8 million b/d, respectively, meaning the call for all of 2015 is below OPEC's current production ceiling of 30 million b/d.
DEMAND MOMENTUM
Despite the lower call on OPEC, the IEA said it expected momentum to gather pace for global oil demand in 2015, albeit at a slower rate than projected last month, as the macroeconomic backdrop improves.
"Projections of oil demand growth for 2014-15 have been reduced, but growth is still expected to gain momentum," the IEA said.
"Recent data suggest that may already have started to happen, thanks in part to narrowing OECD losses. Record-high refinery throughputs in August and improved margins worldwide suggest demand is perhaps not as dismal as it might appear," it said.
It added that sweeping changes in trade flows were exacerbating perception of demand weakness.
"With North American refiners increasingly sourcing feedstock locally and those in Europe downsizing, exporters must compete in the same finite Asian markets," it said.
Having long paid a price "premium", Asian importers enjoy newfound buying power, the IEA said.
"Producers that have relied on long-term contracts, pricing formulae and strict destination clauses may soon find out that this rigid pricing system no longer works in their favor. These shifting flows could be more transformative in the longer run than temporary market rebalancing," it said.
OPEC OUTPUT
OPEC crude oil output, meanwhile, surged to a 13-month high in September, led by Libya's continued recovery and higher Iraqi flows, the IEA said.
Total OPEC production rose by 415,000 b/d from August to 30.66 million b/d.
Saudi supply edged up by 50,000 b/d in September to 9.73 million b/d, the IEA said, but added that flows may ease in October due to slower seasonal demand for domestic crude burn.
It said there was no let-up in Saudi supply to global customers in September, according to tanker tracking data, with a modest pickup in shipments versus August.
"Riyadh appeared determined to defend its market share in the increasingly competitive Asian market -- cutting its formula prices for a fourth consecutive month," it said.
Saudi Arabia's price cuts were followed by other OPEC heavyweights, including Iraq, Iran, the UAE and now Qatar.
Global supply rose by almost 910,000 b/d in September to 93.8 million b/d, on higher OPEC and non-OPEC output, the IEA said.
Stocks have also been rising -- OECD commercial total oil inventories built by 37.7 million barrels over August, to 2.698 billion barrels.
Preliminary data also indicate that inventories rose counter-seasonally by 14 million barrels in September, led by a steep 11.7 million barrel build in middle distillates, the IEA said.
