International Energy Agency reduces 2015 world oil demand
In its newly released August 2014 Oil Market Report, The International Energy Agency (IEA) lowered its world oil demand by 90,000 bbl/day to 94 million bbl/day for 2015. Global world oil growth is forecasted to be at the lowest level since 2012.
The Paris-based agency cites very weak oil demand in the second quarter of 2014 and lower economic growth in China and Russia. Crude oil imports to developed countries, including Europe, are also below forecast. Analysts also point to lower gasoline consumption in the United States, the world's largest oil consumer, perhaps signally a trend towards more fuel efficient vehicles and reduced reliance on cars for transportation.
The IEA also highlighted a supply glut, particularly in the middle-east and north Africa. Output from OPEC climbed 300,000 barrels per day in July for a total 30.44 million bbl/day. Saudi Arabia has ramped up production to 10 million bbl/day. Libya has recently reopened the oil exporting port of Ras Lanuf, the last of 4 ports to be turned over to the government. New production coming out of Libya has failed to find buyers; Libya exported 430,000 bbl/day in July and still only produces only one-third of its 2013 production. Despite on-going conflicts on oil-producing areas of the globe and the threat of supply disruptions in Iraq (OPEC's second largest oil producer), Brent prices have failed to reach new highs.
“Oil prices seem almost eerily calm in the face of mounting geopolitical risks spanning an unusually large swathe of the oil-producing world." - IEA August 2014 World Market Report
The elevated supply levels have kept seaborne Brent futures in contango (where longer term futures contracts are trading at lower prices than near-term contracts). Contango indicates consensus by energy traders that short term prices are temporarily elevated and oil prices are set to drop going forward.
News of the lowered forecast sent seaborne Brent crude futures to a 13 month low today.