A surge in world oil demand that has driven prices to record highs is finally steadying as China reins in runaway consumption, the International Energy Agency (IEA) said today.
The IEA's latest report appears to mark a shift from a two-year period when the IEA and other oil market analysts have been forced repeatedly to raise demand forecasts as consumption in Asia and the United States outstripped expectations.
IEA Oil Market Report
"From the demand side, it would appear that the risks are, for the first time in two years, edging towards the downside," the IEA wrote in its monthly Oil Market Report.
"Interest rates are moving in an upward path in strong growth countries (particularly the US), acting along with high oil prices as an economic drag."
Booming Asian oil demand in 2004, led by China, helped to trigger a rally on the oil markets that pushed prices for US crude to a record peak of $58.28 last month.
In the first two months of 2005, Chinese demand growth slowed to 5.4 per cent, sharply below the 20.8 per cent growth at the same time last year, the IEA said.
But the IEA warned it was too soon to draw definitive conclusions and that economic growth in China remained strong. It left projected Chinese oil demand growth for the full year unchanged at 500,000 barrels per day (7.9 per cent), down from 860,000 bpd (15.6 per cent) for 2004.
The IEA's report also revised annual world demand growth down slightly by 50,000 barrels per day, though it said cold weather had lifted year-on-year OECD demand by 1.28 million barrels per day in February.
Oil supplies are growing, and stocks in industrialised countries are higher than last year. World oil supply rose by 365,000 barrels per day (bpd) to 84.2 million bpd in March, mostly on an increase in supply from OPEC members Saudi Arabia and the United Arab Emirates.
Commercial oil stocks in industrialised nations fell by 39 million barrels, or 1.39 million bpd, in February to 2.57 billion, but were still 96 million barrels higher than a year ago.
Days of forward demand cover rose in February to 52 days from 51 days in January, the IEA said.