The world may escape an oil supply crisis for the next five years because a slow recovery from the economic downturn would hold down growth of demand, the International Energy Agency (IEA) said on Monday.
The IEA slashed its mid-term estimate for world oil demand, which it said may rise by an average 0,6% a year from 2008 to 2014, down sharply from its forecast of 1,6% growth made last year.
“Relative to the medium term profiles presented in previous years, this scenario paints a delayed picture of threatened ‘supply crunch’ later in the projected period,” it said in its Mid-Term Oil Market Report.
That forecast was based on a world growth forecast by the International Monetary Fund (IMF). The IEA also provided a model based on a less optimistic forecast, according to which demand could actually decline.
“Whether we end up facing a supply crunch again by mid-decade, or with a more comfortable buffer of supply flexibility, depends largely on the pace of economic recovery and government action on efficiency,” the IEA’s director, Nobuo Tanaka, said in a statement.
The IEA, the energy-monitoring arm of the 30-nation Organisation for Economic Cooperation and Development (OECD), had warned in April that a sudden easing of tension on the oil market, and rapid price fall, had crimped long-term investment in new fields for the day when demand recovered.
In Monday’s report it sharply lowered its oil supply estimates and cautioned that tighter supply forecasts for 2013 and 2014 raised the prospect of an “increasingly volatile” market in that period.
But the agency said the economic outlook was uncertain and that, according to the lower growth model, yearly average demand could actually decline over the next few years if economic recovery is drawn-out, which could rule out the risk of a supply crunch completely.
“Oil demand growth will be driven by non-OECD countries, while oil consumption in the OECD will decline,” it said, referring to the grouping of 30 rich states. It stressed strong potential growth in China, Asia and the Middle East.
Under the most optimistic scenario, demand could reach 88,99-million barrels a day, from 85,76-million in 2008.
The price of oil had rocketed to $147 a barrel in July 2008 before plunging to about $32 in December. It has since recovered to nearly $70.
On Monday oil prices were flat as investor sentiment was soured by worries about the strength of the United States economy, which is the world’s biggest energy consumer, analysts said.
In morning trading in London, Brent North Sea crude for delivery in August firmed six cents to $68,98 a barrel.
New York’s main futures contract, light sweet crude for August, was unchanged at $69,16.
The IEA also said that “for the first time in 50 years, the world will witness a drop in global gas demand”. — AFP