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economic crisis, the IEA said on Wednesday in a cool assessment of so-
called 'green shoots' of growth. Demand this year would be far
weaker than last year, and an unexpectedly weak rally next year
would fall far short of compensating for this, the International
Energy Agency said. It noted that the oil price had turned more '
bullish' recently, rising by 8.0-10 dollars per barrel from the July
average to about 70 dollars a barrel now, but said that the market
was being underpinned mainly by demand in China and also India.
The benchmark New York contract fell in London on Wednesday by 10 US
cents to 69.35 dollars per barrel. The IEA reported that the US
driving season, a big factor in demand for petrol at this time of
year, had 'fizzled out,' US industrial activity was still falling and
global use of diesel fuel, which is used for trucks, transportation,
and in generators, remained weak. The broad headline findings of
the IEA report chimed with the overall assessment of the
Organization of Petroleum Exporting Countries which reported on
Tuesday that world oil demand would decline slightly this year but
begin to grow in 2010. The IEA said that Chinese demand had '
rebounded' and that it saw 'recovery in economic growth' outside the
OECD area of advanced economies 'prompting a demand rebound in
2010.' For 2009, the IEA revised upwards slightly its expected
demand data but said that this was a mere drip compared to the
overall fall from demand in 2008. It also noted record low oil
output by Nigeria but unexpectedly high production by Russia. The
agency said that it was 'now among the bears for 2009 demand' which
would fall by 2.3 million barrels per day from the 2008 average,
marking contraction of 2.7 per cent. 'Has the global recession
ended?' the IEA asked, posing the pivotal question because demand
for energy is tied to economic activity. 'The most that can be said
is that the global economy may be stabilising—but even if this is
confirmed, it remains far from evident that growth will resume
strongly before the end of the year.' It said: 'Only in China and
India is industrial production growth positive.' Elsewhere
industrial production remained in a state of contraction even though
the rate of decline had slowed slightly. 'More worryingly,
industrial production has seemingly not reached the bottom in the
US.' The monthly report said that shrinkage of demand for oil in
Europe had increased to 900, 000 barrels per day in the second quarter
of this year. 'And the US 2009 gasoline (petrol) season now seems
to have fizzled out before getting started.' Initial US demand for
gasoline in July was 1.8 per cent below the figure for 2008 after a
fall of 1.6 per cent in June. 'Green shoots of economic recovery
there may be, but motorists have curbed driving and, at the margin,
schemes to encourage vehicle fuel efficiency may begin to have an
increasing impact.' The agency, the oil policy and monitoring arm
of the Paris-based Organisation for Economic Cooperation and
Development, said it had revised upwards expected global demand for
oil this year by 190,000 barrels per day, and for next year by
70,000 barrels, because the outlook for Asian demand had risen for
both years. 'This barely dents the sharp demand contraction to
83.94 mbd expected this year, while growth in 2010 is slightly lower
than previously estimated, at plus 1.6 per cent or 1.3 mbd to 85.25
mbd,' the report said. 'The evidence of a bottoming out of the
global recession is patchy, and global gasoil (diesel) demand—a key
indicator of economic health— remains significantly subdued.' The
IEA reported that global oil supplies had risen by 570,000 barrels
per day to 85.1 million barrels per day in July. Two thirds of
this increase had come from producers outside OPEC. Non-OPEC
supply for this year was revised upwards by 160,000 barrels per day
to 51.0 mbd, mainly because of unexpectedly strong Russian supply in
recent months. But supplies of crude oil from OPEC fell by about
100,000 barrels per day in July to 28.64 million barrels owing in
part to record low output by Nigeria. The IEA was at pains to list
issues which fuzzed the outlook for 2010, saying that although 'the
global economy is expected to rebound next year' under the effects of
massive stimulus action by authorities around the world, there was
great uncertainty over what would happen as stimulus was withdrawn.
'It is also unclear whether a rebalancing of the world economy will
occur... as there is little sign that private consumption in key
exporting economies, like Japan, Germany, China, is growing enough
to offset its sharp fall in countries with large current account
deficits, most notably the US.'
