IEA: OECD Economies’ Oil Demand To Fall

Airline fuel managers suffering from jet fuel costs equivalent to $170 per barrel can expect no relief for the rest of the year, even though overall demand for oil in the world’s developed economies is expected to contract 2.8%.

Demand for oil in the large, developed economies of the world should fall for the balance of the year, the International Energy Agency says, but that fall will be more than offset by rising demand in China, India and other emerging economies, and supplies will continue to remain tight.
The supply side of the picture is complicated by OPEC, which is showing no sign of increasing production, now that the market seems able to bear oil prices of more than $100 per barrel, the IEA said in its monthly Oil Market Report. The cartel could raise production if global demand — particularly U.S.– falls off sharply, however, IEA analyst Julius Walker told The DAILY.

But OPEC’s ability to raise production is limited to about 2.3 million barrels of oil per day, much of that comprised of low-quality crude that is harder to market and refine, Walker said. For the most part, refiners don’t want it, and turning that grade of oil into Jet A is too difficult and costly to justify.

“It is questionable if OPEC could pump more, even if it wanted to,” he noted, explaining that political turmoil in places such as Nigeria is preventing increased production. Oil production in non-OPEC oil countries is at maximum capacity, the IEC said.

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