IEA: "Demand Destruction" Overstated; China Demand Leaps
by Adam Smallman
Thu, Nov 10, 2005 12:04 GMT
LONDON - The International Energy Agency Thursday poured cold water on talk of a slump in world oil demand, with new data pointing toward a resurgence in Chinese consumption and likely upward revisions to U.S. consumption data.
"There is little evidence that provides a conclusive or country-wide answer" to talk of "demand destruction," the agency said in its widely-watched Oil Market Report.
"The potential for future revisions" remains, it added. "Demand could be understated" and could increase the need for crude supplies from the Organization of Petroleum Exporting Countries in the northern hemisphere's winter.
Despite this, the energy watchdog for the industrialized world tweaked its global oil demand growth forecast for this year negligibly lower, by 1.2 million barrels a day, to 83.3 million b/d.
The biggest revision came in its expected growth in fourth-quarter demand. It sliced 400,000 b/d from growth in the peak-demand winter period.
But tightness from a colder-than-expected winter and strong economic growth means "this could be the calm after the storm, or simply the storm's eye - either way, smooth sailing is not assured."
But demand weakness in recent months, caused by unusually warm weather across major consuming regions, the impact of U.S. Gulf coast hurricanes, and high world oil prices, is being partially offset by China.
The IEA said Chinese oil demand in September surged almost 9%, led by a huge increase in gasoline consumption of more than 14%. Tax changes inhibited gasoline exports, car purchasing is on the rise and its economy continues in rude health.
At 7 million b/d in the final quarter, demand in the world's second-largest oil consumer is to remain strong this year, the agency added, though it made no significant revisions to its outright growth forecasts this year and next.
The agency reserved its biggest caveats over widely-held assumptions that record crude prices had had a deleterious effect on demand.
"It is important to emphasize that the widely reported drop-off in demand in the weeks following the hurricanes is likely overstated," the report said. "As such, recent weakness in preliminary gasoline demand data needs to be viewed with caution, particularly when set against recent upward revisions to August data and broader macroeconomic fundamentals."
Conceding the impact of Hurricanes Katrina and Rita were lingering, oil demand growth is rising again.
Demand among Organisation for Economic Co-operation and Development members is forecast up 0.6% in November on the year, and up 1% in December, having being crimped by the warmer weather last month. |
