IEA lifts forecast for growth of global oil demand

Economic concerns in China and a nuclear outage in Japan are pulling global oil demand growth in opposite directions, said the International Energy Agency yesterday in its monthly report.

Economic concerns in China and a nuclear outage in Japan are pulling global oil demand growth in opposite directions, said the International Energy Agency (IEA) yesterday in its monthly report.

The energy watchdog based in Paris lifted its forecast for global oil demand by 100,000 barrels per day (bpd) to 89.8 million bpd this year and 90.6 million bpd next year. "Concerns about the health of the global economy are also rising in the wake of bearish economic indicators from the US, the euro zone and now, increasingly, the engine of oil demand growth of the last decade - China," wrote the agency.

The IEA projected demand growth there would slow to 2.6 per cent this year, compared with yearly growth of nearly 9 per cent from 2002 to 2006.

"Government support for the economy will likely restrain the worst of any downward momentum," it added.

Yesterday, Brent, the European crude benchmark, rose by about US$1 to reach $116.48 a barrel in midday trading.

Japan helped keep global oil demand - expected to remain depressed for the next 18 months - from falling further amid economic uncertainty in China, the world's biggest energy consumer.

Japanese oil demand grew by 400,000 barrels per day, or 10 per cent, in the second quarter of this year as utilities scrambled to provide power while they await approval to restart reactors.

The ruling Democratic Party of Japan last week proposed phasing out nuclear power by the 2030s in Japan in the wake of the triple meltdown at the Fukushima Dai-Ichi power plant in March last year that was triggered by an earthquake and tsunami.

Japan has started a state-backed insurance programme to cover liftings from Iran, which has been hit by western sanctions on Iranian oil and financial transactions that prevent most insurance providers from covering tankers.

Although Iranian production declined slightly to 2.85 million bpd last month, exports grew to 1.1 million bpd from 930,000 bpd the month before.

But the upturn may be temporary, warned the agency, should western countries choose to augment slow-going negotiations over Tehran's nuclear programme with tighter sanctions.