(MENAFN- The Peninsula) Demand for oil is feeling the squeeze of weak growth in Europe, slowdown in China and abundant supplies, the International Energy Agency said yesterday.
Shale oil from North America continues to change the global energy landscape, and shipments from Opec countries are shifting increasingly eastward, from routes to the United States towards Asia. And output from the Organisation of Petroleum Exporting Countries remains plentiful despite conflict in Iraq and unrest in Libya.
All these factors help to explain why the price of oil has fallen below $100 a barrel, the IEA said in its monthly review of the oil market. The growth in demand for oil this year and next will be markedly lower than expected, the agency said.
"The recent slowdown of demand growth is nothing short of remarkable," the International Energy Agency said.
Also, "Opec demand has been remarkably robust in view of the troubles in Libya and Iraq."
The agency attributed the "clear slowdown" in demand growth to "ongoing weakness in both European and Chinese economies, coupled with lower-than-expected oil deliveries in Japan and Brazil."
Recent economic "malaise" across much of Europe "has been the dominant downside influence" on the oil market, it said, with the eurozone "struggling with stagflation" and "getting perilously close to deflation".
Meanwhile, growth of demand for oil in China was "anaemic".
Compensating in part for this, was an increase in overall deliveries to the United States.
The IEA cut its estimate for oil demand this year to growth of 1 percent or to 900,000 barrels per day, from a previous estimate of 1.1 percent or 1 million barrels per day. That takes total demand for the year to 92.6 mbd.
In the second quarter of this year, growth of demand showed a fall to the lowest rate for two and a half years to about 480,000 barrels per day from the level in 2013.
"Eurozone economic growth is petering out, while US petrochemical usage fell alongside pronounced declines in Japanese power-sector demand," the IEA said. The agency "tempered" its outlook for 2015 to growth of 1.2 mbd from 1.3 mbd forecast previously.
This update put global deliveries at 93.8 mbd, or about 165,000 bd less than previously forecast.
But this would still amount to a "notable" acceleration of demand from the level in 2014, the IEA said. "While demand growth is still expected to gain momentum, the expected pace of recovery is now looking somewhat more subdued."
The amount of oil held in inventories was rising, with industrial stocks in the area covered by the Organisation for Economic Cooperation and Development rising by 15.5 mb in July to 2,670 mb, and the signs were that another 19.5 mb had been added in August. While noting that supplies were plentiful and prices had fallen, the IEA also said that global supplies of oil in August had fallen by 400,000 barrels per day to 92.9 mbd because production from outside Opec had fallen.
Also, output by Opec fell in August by 130,000 bd to 30.31 mbd "as steady recovery in Libya failed to offset lower supply from Saudi Arabia and Iraq."
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