PARIS: Sluggish global economic growth is crimping demand for oil, including in emerging market powerhouse China, the International Energy Agency said yesterday.
"Relatively sluggish macroeconomic conditions are expected to keep a lid on growth in 2013," the IEA said.
The agency trimmed slightly its forecast for oil consumption, saying demand would expand by 785,000 barrels per day this year to 90.6 million barrels per day (mbd).
This marked a fall of 0.08 percent from the previous forecast.
While emerging countries led by China have driven global oil use growth in recent years, the IEA said "there are mounting signs that China's oil use, like its economy, may have shifted to a lower gear."
It now sees Chinese oil demand growing by 3.8 percent instead of 3.9 percent this year, in line with a recent cut by the International Monetary Fund of its forecast for Chinese economic growth to 7.75 percent instead of 8.0 percent.
It also pointed to the latest survey data showing shrinking manufacturing output in China last month.
Nevertheless demand for oil from emerging and developing economies is set to exceed demand demand by advanced economies in the 34-nation OECD club this quarter, the IEA said, although they will not hold that position consistently until next year.
Oil markets, like equities markets, have been hit by sharp swings in recent weeks by the prospects of reduced monetary stimulus by central banks as economic growth picks up.
However, the IEA confirmed its outlook for rising oil demand for the rest of 2013 as the economic recovery picks up steam.
"While demand is projected to remain relatively sluggish overall, growth is expected to gain momentum through the end of the year ... as the underlying macro-economy strengthens," said the Paris-based agency which advises oil consuming nations.
It said both that oil demand growth and the underlying economic expansion were expected to show their weakest growth in the current quarter.
In Asian trading yesterday, oil prices fell in line with equities as traders were still preoccupied with the Bank of Japan's decision to hold off unveiling any fresh economic stimulus, analysts said.
New York's main contract, light sweet crude for delivery in July, dropped 83 cents to $94.55 a barrel and Brent North Sea crude for July delivery shed 53 cents to $102.43 in early afternoon trade in Asia.
Meanwhile oil supplies edged lower on a monthly basis to 91.2 mbd, mostly due to Canadian maintenance operations, but were still up on an annual comparison.
Supplies by the OPEC organization rose to a seven-month high of 30.89 mbpd in May.
At a meeting last month, OPEC ministers kept their 30 mbd production ceiling.
Saudi output rose to a six-month high of 9.56 mbd.
Despite international sanctions over its nuclear program, Iranian output edged up to 2.68 mbd in May, with exports of around 1 mbd.
For non-OPEC countries, year-on-year production growth remains strong in North America where there has been a boom in non-conventional supplies pried shale rock formations thanks to the new extraction technique hydraulic fracturing, or "fracking".
However the IEA noted there are downside risks to the outlook for non-OPEC production due to the threatened blocking of South Sudan export routes and seasonal maintenance operations possibly taking longer.
Industry stocks in the 34 OECD countries rose by 16.7 million barrels in April to 2,680 mb, in line with seasonal changes, with crude stocks at the key Cushing, Oklahoma storage hub at a historical high at 50 mb throughout May.
Government-controlled stocks edged up to 1,580 mb in April from March, and were up 44 mb from April 2012.
The IEA also flagged possible market disruptions caused by refining capacity climbing over 10 percent in the coming years despite muted growth in demand by consumers.
Prices and margins could be hit, with older refineries in advanced nations expected to come under most competitive pressure.
