The Oil Market Reportfor November cut further the IEA oil-demand forecast through the end of the year amid the continued European economic weakness and the residual effects of Hurricane Sandy in North America. The estimate of fourth-quarter demand has been reduced by 290 000 barrels a day, or 290 kb/d, the monthly report predicted today, adding to the previous report's 200 kb/d barrel cut in the 4Q12 outlook.
The reduction in the forecast brings the projection of year-on-year demand growth for the quarter to 340 kb/d, down by 260 kb/d since last month's forecast. If confirmed, this would be the slowest pace of year-on-year growth in quarterly oil demand since the fourth quarter of 2011.
Oil demand for the final quarter is now expected to be roughly unchanged from the third quarter, at 90.1 million barrels a day.
The slowdown in demand growth comes as global output rose by 810 kb/d in October, even though total OPEC production eased 30 kb/d. With a slight gain, Iran ended a seven-month-long steady decline in supply related to international sanctions. Iranian exports and production remained steeply down from last year, however, as a result of expanded sanctions that took effect in July.
Subdued oil demand increases and rebounding supply growth, fuelled in part by new US light tight oil and Canadian oil sands production, go a long way towards explaining why the market appears to have taken chronic supply disruptions in its stride this year, including most recently major problems in East Coast product distribution of the United States as a result of Sandy.
"2012 may go down in oil history not just as one of exceptionally frequent supply disruptions, but also as one when no production shortfall seemed large enough to affect global oil markets in a truly big way,"
Source: International Energy Agency (IEA)