Oil demand cools after record prices

FE Team | Published: November 14, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Javier Blas
FT Syndication Service
RIYADH: Recent record high oil prices are beginning to depress demand for crude, an energy watchdog said on Tuesday.
The International Energy Agency (IEA) revised its forecasts for oil demand for the rest of this year and for 2008 lower in its monthly report.
Weaker demand will reduce pressure on the Organisation of Petroleum Exporting Countries (Opec) to increase production to cool down prices that recently approached the key $100-a-barrel level.
There are "strong signs that higher prices are depressing demand," the watchdog said in its oil report for November. Oil prices have recently sharply this year taking them close to the 1980 oil-crisis highs in inflation-adjusted terms.
The IEA cut its forecast for oil demand in the fourth quarter of 2007 by a hefty 570,000 barrels a day to 87.1m b/d. Combined with a previous cut in its October report, the reduction in the demand forecast for this winter hit 900,000 b/d.
The IEA also reduced its estimate for the 2008 average by about 300,000 b/d to 87.7m b/d. Analysts from the private sector had previously criticised the IEA's forecast as overly optimistic.
The energy watchdog also lowered significantly its estimate of the need for Opec oil this winter and next year. The IEA said that Opec will have to supply about 32m b/d during the fourth quarter, a 700,000 b/d cut from last month estimates. For 2008, it said that the oil cartel would have to deliver on average of about 31.3m b/d, a 500,000 b/d cut.
Ali Naimi, Saudi oil minister, on Monday told the Financial Times that Opec would not discuss an increase in production at its Riyadh summit, but he left the door open to a review at the next Opec meeting, in Abu Dhabi on December 5.
Mr Naimi said that it was premature to say whether Opec would need to increase its production, but noted that inventories levels were "comfortable". The minister added that Saudi Arabia was producing below its maximum production capacity. "Demand for it is not there, the customers are not there," Mr Naimi said.