IEA reduces world oil demand estimates for 2002

The International Energy Agency scaled back its estimate of world oil demand for the first quarter of 2002 by 200,000 bpd to 76.4 mm bpd, but said it was still banking on a modest recovery later in the year. On that assumption, the Paris-based IEA, to which 25 industrialised oil-consuming countries belong, reduced its forecast for full-year demand growth by only 60,000 bpd to an increase of 500,000 bpd.
Last year saw global demand grow by only 100,000 bpd, the smallest yearly increase since 1985. Demand fell particularly sharply after the September 11 terrorist attacks in the US. In its latest monthly oil report, the agency expressed uncertainty about the state of the oil market, saying it was subject to opposing forces from OPEC production cuts tending to raise the price of crude and from weak refinery demand tending to depress it.
But the IEA said it "continues to assume that economic growth will gather momentum in the second half in the US, spreading from there to Europe and other key Ustrading partners". With a topical eye on Enron and other corporate problems, it also warned "a budding crisis of confidence in the stock market, following disclosure of accounting irregularities in several publicly traded corporations, could further hamper companies' access to cash and keep a lid on corporate investment".

Supply became a little tighter last month, the agency estimated, with production or export cutbacks by 10 OPEC countries and five non-OPEC countries resulting in world oil output falling by 510,000 bpd, from 76.8 mm bpd in December last year to 76.3 mm bpd this January. However, this decrease was only a quarter of the nearly 2 mm bpd which the OPEC and non-OPEC countries had agreed to take off the market from January 1.
Only a fifth, or 100,000 bpd, of the actual decrease came from non-OPEC countries, and it appears increasingly likely that Russia is flouting its promise to OPEC to cut exports by 150,000 bpd. The IEA estimates that Russian production rose by 60,000 bpd last month.

Part of the January increase may be compensation for a 90,000 bpd fall in December, due to winter weather at Russian loading ports. But the agency said "recent statements by officials from the government and oil industry are casting a cloud over Russia's cooperation with OPEC". Russia is fast regaining Soviet-era levels of oil production, and is the biggest non-OPEC producer.
Four other non-OPEC producers also promised the cartel that they would make cutbacks. Of these, Angola actually raised output last month by 60,000 bpd last month, while Oman kept production unchanged. By contrast, Norway and Mexico honoured their commitment by reducing output by 160,000 bpd and 100,000 bpd, respectively, last month, the IEA said.