IEA Oil Market and EIA World Liquid Fuels Consumption Outlook

With the oil market still digesting the impact of unrest in North Africa and the Middle East, as well as last month's
devastating earthquake and tsunami in Japan, the International Energy Agency gave evidence on April 12 of a continued tightening of fundamentals.

 In its latest monthly oil market report, the Paris-based IEA said crude stocks in OECD countries were falling, and were in any case not that high, if you ignore the high inventories in the landlocked US Midcontinent region. 

And crude output, meanwhile, is falling. The IEA estimated that world oil production fell to 88.3 million b/d in March, down 700,000 b/d from February's levels, largely as a result of a sharp fall in output from conflict-torn Libya. 

OPEC crude output fell by around 890,000 b/d in March as other member states failed to make up for the large drop in Libyan production, the agency said. 

Looking forward, the IEA said it seemed unlikely that OPEC would agree any formal increase in production when it next meets in June, noting a number of internal disagreements which could make a consensus hard to reach. 

In the meantime, oil prices remain at levels the IEA believes to pose a danger to global economic growth. 

But with producers seemingly unable to do much to cool down the market, the IEA suggested that the best remedy for the high prices might be the impact of the price on demand. 

"Economic impacts from high prices are never instantaneous, and often take months to materialise, but preliminary data for early 2011 already show signs of oil demand slow-down," it noted. 

In the US, the world's biggest oil consumer, the IEA said retail fuel prices may be reaching prices at which motorists start to cut their consumption. 

In China, the world's second-biggest oil user, where consumption has been growing rapidly in recent years, demand growth slowed to an annual rate of 9.6% in February, down from 13% in January and 15.9% in December, the IEA said. They added that "private Chinese motorists may be starting to feel the pinch from high fuel prices." 

Despite sounding a note of caution about oil demand, the IEA nonetheless left its projections for this year largely unchanged. It expects world oil demand to rise by 1.43 million b/d in 2011 to reach an average for the year of 89.36 million b/d, or only around half of last year's increase of 2.91 million b/d.