There are signs that super high crude oil prices have started to depress oil demand as drivers in the world's industrialized nations start to feel the pain of almost $100 oil, the International Energy Agency said Tuesday in its monthly oil market report.
Weaker-than-expected economic data in the U.S. and the former Soviet Union is also contributing to a downturn in demand, the IEA said in its closely watched report on oil demand and supply.
"Price effects are clearly starting to spill through into demand," the report's editor Lawrence Eagles told Dow Jones Newswires.
"We're seeing it in the transport sector in the U.S., which is typically very unresponsive to high prices, as well as in other areas," Eagles added.
In its report, the Paris-based agency cut its 2007 world oil demand growth forecast to 1.2% from 1.5% in the previous report. The IEA also cut its oil demand growth forecast for next year to 2.3% from 2.4%. The report will be closely read by ministers from the Organization of Petroleum Exporting Countries, who will hold a closed meeting either Thursday or Friday ahead of a summit of the group's leaders this weekend in the Saudi capital, Riyadh.
Earlier Tuesday, Saudi Arabia's Oil Minister Ali Naimi told a news conference in Riyadh that he didn't see tightness in global oil markets and was comfortable with the Organization for Economic Cooperation and Development inventories.
U.S. benchmark crude oil was trading at below $94 a barrel Tuesday, down from a record high of $98.62 a barrel last week. Prices have been high on forecasts of tight supplies over the winter period in the northern hemisphere.
However, there aren't signs that high oil prices are affecting demand in China and countries in the Middle East, which are outside the OECD,as subsidies and continued strong economic growth keep demand up. "Non-OECD demand remains relatively robust," Eagles said. "(Non-OECD) countriesare growing at such a rate that it is growth that's affecting demand rather than price," Eagles added.
Meanwhile, OECD industry oil stocks continued to fall with total forward cover dropping to 52.8 days in September, or 2.65 billion barrels - a level close to the five-year average. Inventories in Japan fell to the lowest level in 20 years.
A further draw in oil inventories of 21 million barrels is expected in October, the report said.
"We were expecting a lull in October in the stock draw, but preliminary data in the U.S. and Japan is showing another big stock draw," Eagles said.
Meanwhile, crude oil supplies were up in October.
According to the IEA, OPEC's daily output in October rose 410,000 barrels to 31.2 million barrels, led by a recovery in oil flows from Iraq and on new projects coming onstream in Angola.
However, signs of higher November supply from Saudi Arabia, Nigeria and others may be offset by U.A.E. oil field maintenance, the IEA said. But, faced with weaker-than-expected demand, the IEA cut the implied daily need for OPEC's oil in the October-December period by a hefty 700,000 barrels to 32 million barrels, and by 300,000 barrels in the first three months of the new year, also to 32 million barrels.