Demand for oil slows in pace with global economy

by The Associated Press

The growth of world oil demand has slackened faster than expected, in pace with a cooling global economy, but has yet to push prices lower, a respected industry survey said Feb. 12.

World oil demand growth in 2001 has fallen by 140,000 barrels per day to 1.5 million barrels per day, the Paris-based International Energy Agency said in its monthly report.

It predicted continuing volatility in oil markets because of moves by OPEC to cut production to keep prices high, and the consequent reduction in oil inventories.

“Over the short term, low stocks limit the ability to respond to events such as severe weather conditions, pipeline disruptions, unscheduled refinery maintenance, spikes in demand or fuel switching,” the report said.

“This contributes to regional supply imbalances and price volatility. We lumber from one crisis to another.”

The report said oil demand figures since October have fallen below expectations. “Even January shows only modest growth, despite strong short-term substitution of oil for natural gas in North America.”

High prices and mild weather in Europe and Asia are part of the story, but “the global economy is slowing, curbing demand,” the report said.

The IEA is the energy arm of the Organization for Economic Cooperation and Development, which represents the interests of the world’s richest countries. It generally argues for keeping oil prices cheap and supplies plentiful.

World oil production increased half a million barrels per day in January to an average of 77.9 million barrels per day.

Iraq’s production under the oil-for-food program reached 1.8 million barrels per day, approaching for the peak of 2.3 million barrels per day in the autumn, the report said.

Gasoline prices rose 18 percent in New York while prices in northwest Europe and the Mediterranean went up about 10 percent, the IEA said.

The IEA said it welcomed talk by producers of joining with consumers to calm price volatility.

“But talk will just be talk so long as actions remain focused solely on high short-term revenue,” the report said.

“Unless policies change, the market will be in for a rough ride...”