PARIS – Global oil demand growth will fall next year below already very weak levels of 2012 due to a slow-down in economic activity, the West's energy watchdog said Friday. The outlook by the International Energy Agency (IEA) echoes similarly pessimistic forecasts revealed this week by the US government and the Organization of the Petroleum Exporting Countries (OPEC). The IEA also said oil prices may remain elevated in the next few months as geopolitical tensions, including a stand-off between the West and Iran over Tehran's nuclear program, offset the bearish impact of the weaker global economy. "The geopolitical dimension is likely to continue to provide something of a floor for prices. The issue of Iran will likely continue to weigh heavy on the market through the second half of 2012," the IEA said in its monthly report. "Moreover, there is a risk that recent progress in restoring output from Libya, Iraq and Nigeria could be jeopardized if recent political and civil tensions worsen." Oil prices have plunged below $90 a barrel in June after Saudi Arabia stepped in to raise production to multi-year highs at a time when Iranian exports plunged because of Western sanctions. Prices have recovered to above $110 a barrel in August supported by Iranian tensions and investors' hopes for new money printing programs from global central banks to support the flagging economy. The IEA said it had revised its forecast for oil demand growth in 2013 down by 150,000 barrels per day (bpd) to 830,000 bpd, below the growth of 870,000 bpd expected in 2012. "The latest (Chinese) data reveals a sharp deceleration in momentum compared to the double-digit expansions seen at the beginning of 2011," the IEA said. On the supply side, global oil production stood in July 2.6 million bpd higher than a year ago, with 80 percent of the increase deriving from OPEC. "OPEC effective spare capacity nudged higher to 2.57 million bpd but remains slim relative to current supply-side risks permeating the market," the IEA said. The agency also said imports of Iranian oil by major consumers could start picking up from August. It estimated that in July exports of Iranian oil had fallen to multi-year lows of 1 million bpd from 1.74 million in June. "There is scope for imports from Iran to recover modestly from September onwards, albeit we retain our existing assumption that around 1 million bpd of Iranian oil may struggle to find buyers in the second half of 2012." "An observed decline of 14 million barrels in Iranian floating storage in July also suggests that some extra oil is en route to customers for August/September delivery," the IEA added. – Reuters
