IEA expects oil demand to slow as US consumers change lifestyle

The IEA cut its estimate for global oil demand this year and next, saying consumers mainly in the United States are changing their lifestyles in response to high prices.
The International Energy Agency's monthly report, printed before OPEC decided overnight to cut output by 520,000 bpd, said that OPEC supplies had already fallen in August by 195,000 bpd. The IEA said that this decline had left OPEC supplies in August at 32.5 mm barrels on production problems in Iraq, Angola, Libya and Nigeria.

OPEC set its new production ceiling, excluding output by Indonesia and Iraq, at 28.8 mm bpd. In Singapore earlier, the New York oil contract price responded to the OPEC decision by rebounding $ 1.41 to $ 104.67 a barrel.
"Weaker OECD demand and higher stocks (of oil) dominated sentiment," as prices fell towards 100 dollars a barrel in August, the IEA said, referring to the 30 member countries of the Organisation for Economic Cooperation and Development. "There are clear signs that weakening economic prospects plus high prices are causing behavioural shifts and purchasing choices in the OECD countries," the IEA said.

It was not clear that these changes would continue if prices weakened further, the report noted, reporting a sharp easing of demand in developed countries but strong growth in some developing countries, many of which subsidise consumption. In a special section on the possibility that some demand would be "destroyed" permanently as consumers reduced energy consumption, it said that experience and theory showed behaviour responded more to price rises than to price falls.
The report, which foresaw the OPEC decision, cited reports suggesting that some OPEC countries wanted to aim for a price floor of $ 100 per barrel. But it was also suggested that "Saudi Arabia and others" in the Organization of Petroleum Exporting Countries "may see a lower floor of perhaps $ 80 per barrel" mindful that high prices would depress OECD consumption.

So far the oil market had largely shrugged offthe threat of hurricanes to production in the US Gulf, but this remained a danger, the report said. The weather, technical shutdowns and political strains such as those which had disrupted shipments from ports in Georgia, showed how quickly the supply-demand balance could be disrupted.
Global demand will still expand this year and next, the International Energy Agency said, but it cut back its estimate of the growth by 100,000 bpd this year and 140,00 bpd next year from its estimates only a month ago.