The International Energy Agency on Tuesday said high, $100 a barrel crude prices continue to chip away at oil consumption in the U.S. and other industrialized nations, but warned that there is unlikely to be much relief from current prices because of brisk demand in China and other emerging markets.
As it has in recent months, the Paris-based agency revised down 2008 crude consumption in the U.S., Europe and other developed markets. In its March report that revision was for a 190,000 barrels a day drop to 49.27 million barrels a day. In past years, falling demand in those areas typically delivered some relief from high oil prices.
But that rule-of-thumb carries far less weight today because most of the oil demand growth is coming from China, India and other fast-growing emerging markets, where consumers are largely protected from the effects of high oil prices due to fuel subsidies that reduce incentives for conservation.
On this front, the IEA, energy watchdog to the world's most industrialized nations, revised up its 2008 oil demand forecast for China and other non-Organization for Economic Cooperation and Development countries by 120,000 barrels a day to 38.27 million barrels a day due to changes to 2006 data. "In our view, demand growth can remain robust in the face of high prices and OECD economic slowdown. This is not least because the main centers of growth in the developing Asian and Middle Eastern economies are largely insulated from some of the pricing pressures affecting other markets," the IEA said. The agency doesn't forecast oil prices.
On the New York Mercantile Exchange Tuesday, light, sweet crude futures for April delivery traded at $107.55 a barrel at 0915 GMT, down 35 cents, after hitting a record $108.21 a barrel in Asia earlier Tuesday.
Taking into account the contrasting OECD and non-OECD demand pictures, the IEA actually revised up its world oil consumption growth rate by 60,000 barrels a day from its February report due to baseline revisions. The agency sees world oil consumption growing by 1.7 million barrels a day this year.
The IEA said the Organization of Petroleum Exporting Countries' decision last week to rollover its existing production -- rather than increase output -- and to not meet until September helped to encourage speculation in global oil markets.
"While the latest output decision does not totally ignore price, the decision not to meet until September increases concern that there is no room for stronger demand or delays in non-OPEC production. That by itself provides fertile ground for speculation," the IEA said.
"The market is concerned that producers are more inclined to react to price declines than price rises," the IEA said.
Oil stocks in OECD nations recovered in January, rising to a more comfortable 53 days of forward demand cover from a four-year low of about 51 in December.
The IEA revised down its outlook for non-OPEC supplies this year by 100,000 barrels a day due to lower supplies from Asian and South American producers.
OPEC's effective spare production capacity in February stood at about 2.2 million barrels a day, down from 2.35 million barrels a day in January, the IEA said.