The International Energy Agency lowered its oil demand forecasts for 2014 and 2015 due to a “pronounced slowdown in demand growth in the second quarter of this year and a weaker outlook for Europe and China”. The agency stated that the recent slowdown in demand growth is nothing short of remarkable. Global demand will increase by 1.2 million barrels a day, or 1.3%, to 93.8 million barrels a day next year, that is is 165,000 barrels a day less than it forecasted a month ago.
The West’s energy agency said that North America’s shale oil boom has already international repercussions: it’s pushing Saudi Arabian oil out of the U.S. market just like it did with West African crude decades earlier, and estimated that Saudi exports have likely run below 7 million barrels per day for the last four months — their lowest level since September 2011. “Exports to the U.S. led the drop amid rising Saudi domestic demand for crude burn and refinery runs,” the IEA said.“Oil is a leading indicator, so maybe the global economic recovery is weaker than we think,” said Antoine Halff, author of the report. “At the same time you can see more structural changes in consumer behavior and a shift towards more efficient technologies trickling through the numbers.”
Global supply declined 400, 000 barrels per day (400 kb/d) in August, to 92.9 mb/d, as non‐Organization of the Petroleum Exporting Countries production eased. Also, non-OPEC production fell by 130 kb/d in August to 30.31 mb/d as a steady recovery in Libya failed to offset lower supply from Saudi Arabia and Iraq. But compared with August 2013, global supply rose 810 kb/d as a 1.2 mb/d rise in non‐OPEC output more than offset a 370 kb/d year-on-year drop for OPEC. Non‐OPEC supply is set to expand by 1.6 mb/d in 2014, and 1.3 mb/d in 2015, to reach 57.6 mb/d.
OPEC also recently cut its estimates of demand for its own crude this year and the next as it signaled that a surplus of more than 1 million bpd in 2015 would occur if the group keeps output at current levels. Bad news doesn’t end there. Foreign Policy reports that the U.S. Energy Information Administration (EIA) “tweaked its outlook for oil prices to reflect the new market dynamics. In the reference case, the EIA now expects prices to stay below $100 a barrel until early in the next decade. Even when prices rebound, the EIA slashed its estimate for how high crude will go — to just $141 a barrel by 2040, rather than the $165 predicted just last year. If global economic growth remains sluggish, the EIA sees oil prices stuck below $75 a barrel for decades to come.”
Geopolitical confrontations are at a high and will continue to be that way for a while. As the U.S. searches for its voice and its place, a flood of U.S. gasoline exports to the world market might make things even more complicated.