LONDON (Reuters) - Global oil demand will grow by less than 1 percent in 2012, the International Energy Agency (IEA) said on Friday, cutting its oil growth demand forecast for a sixth consecutive month due to a weak global economy.
The agency, which provides energy advice to the world’s most industrialized nations, cut its global oil demand growth forecast for this year by 250,000 barrels per day (bpd) to 800,000 bpd.
“This month’s report dwells on recent economic downgrades, and resultant weaker oil products demand growth for 2012,” the IEA said. “This is providing a ceiling for otherwise stubbornly-high crude prices.”
The IEA cited a cut by the International Monetary Fund (IMF) in its economic projections with the global economy now expected to expand by 3.3 percent in 2012, a “sharp deterioration” from its previously assumed 4 percent growth.
The Organization of the Petroleum Exporting Countries (OPEC) also cut its world oil demand growth forecast on Thursday due to economic weakness, predicting a rise of 940,000 bpd in 2012, 120,000 bpd less than its forecast last month.
In contrast, the U.S. Energy Information Administration raised its estimate of global demand growth in 2012 by 50,000 bpd to 1.32 million bpd in a report on Tuesday.
The IEA said oil demand in the most industrialized nations was expected to fall by 0.8 percent, with gasoline accounting for more than 40 percent of the decline.
The latest preliminary statistics for December point to a sharp fall in North American oil demand, down 4.1 percent year-on-year, despite reports of economic resilience.
The IEA linked this to sharp declines for heating oil and liquefied petroleum gas (LPG) thanks to an unseasonably mild winter in the United States.
In line with the weak economic outlook, European oil demand is likely to post the greatest relative decline in 2012, the IEA said, down by 0.3 million bpd from 2011.
“Much of Europe already saw declines in economic activity in 4Q11, and with further drops assumed for the 1Q12, this equates to the technical definition of recession,” it said.
However, the non-OECD region will see demand growth of 1.2 million bpd or 2.8 percent in 2012, helping offset the reduction in OECD consumption, the IEA said.
Despite the cuts in the oil demand forecasts, oil supplies from OPEC rose in January to the highest since October 2008, at 30.9 million bpd. The IEA pointed to a steady ramp up in Libyan production and sustained output from Saudi Arabia and the UAE.
Global oil supply rose by 0.1 million bpd to 90.2 million bpd in January, with OPEC supply 900,000 bpd above the group’s 30 million bpd collective output target agreed in December.
But non-OPEC supply fell by 0.2 million bpd to 53.2 million bpd, partly due to an escalation of the conflict in Syria and the dispute over transit revenues between Sudan and South Sudan.
The IEA said South Sudan’s 260,000 bpd could remain absent from world markets for the near future but added that North American light tight oil production and growing production in Latin America should support a strong non-OPEC supply rebound.
“The market in 2012 likely has sufficient supply-side flexibility” to adjust to any loss in Iranian volumes due to international sanctions, the IEA said, noting that customers of Iranian crude had already begun to line up alternatives.
Based on 2011 exports, the EU embargo could affect up to 600,000 bpd of supplies, the IEA said, adding some estimates suggest up to 1 million bpd of Iran’s 2.6 million bpd of exports may be replaced by alternative supplies once sanctions take effect.
It noted Saudi Arabia had said it could increase production to around 11.8 million bpd in a matter of days, and Angola, the UAE, Libya and Iraq were all expected to bring on new production capacity over the course of 2012.
“Despite these assurances, perceptions of impending supply issues are clearly placing a floor under oil prices for now,” it added.
Additional reporting by Zaida Espana; editing by James Jukwey