(MENAFN- The Peninsula) Global demand for oil is unlikely to get boost despite lower oil prices. Strengthening of US dollar coupled with weakness in global economy will keep the demand for oil subdued in the short to medium term, according to a senior official of International Energy Agency (IEA).
"Current lower oil price are partly coming from slower demand growth than expected in the past several months. In such kind of weak economic growth backdrop, we expect that in spite of lower oil prices, the demand growth will be kind of slower compared with past cycles of oil prices. The current lower oil prices will not boost the global demand growth," Keisuke Sadamori (pictured), Director- Energy Markets and Security at IEA told The Peninsula.
According to Sadamori, the global oil demand is likely to be around 0.9 million barrels per day in 2015.
Oil industry watchers were expecting that the sharp fall might prompt oil consuming countries to buy more oil but weaker economic growth in European countries, Japan and China has led to lower demand of oil from these countries.
Now appreciating US dollar has also emerged as a major drag in the oil demand. In the past one year dollar has risen significantly against many currencies due to recovery in US economy.
A depreciating currency affects imports of a country adversely as imports become costlier which means that these countries will not be able to reap the benefit of falling oil prices fully.
"Even though oil prices are going down in US dollar terms the dollar is appreciating against many currencies. So for the countries with weaker currencies, actually the oil prices are not as low for them, as in dollar denominated terms. For these countries, at the end consumer level, the oil products prices may not be going down much," said Sadamori. "And there are some countries who are using this opportunity to reduce their fossil fuel subsidies like Indonesia, Thailand, Malaysia and India," he added.
Brent crude prices had plunged below $50 a barrel in January this year from highs of above $110 in June last year. Prices have recovered to some extent as Brent Crude hovered around $60 a barrel in February.
Crude prices have declined on the back of new supplies hitting markets, in particular from shale oil production in the United States, and slower global economic growth, including in Asia. Now crude oil prices are trading around $55-$60 per barrel range.
He added that the additional demand for oil will be coming from China India and Asean countries. "Emerging Asia will the leader in the demand growth, also there will be additional demand from Africa, the Middle East and Latin America. Even though Africa will see fairly solid growth, but the starting point is lower than the Asian countries," he said.
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