The International Energy Agency (IEA) forecast a substantial cooling of demand and an increase in supply. In its monthly oil market report released Thursday, the IEA noted that Saudi Arabia raised its output by a further 100,000 barrels a day to reach 9.8m b/d in July, the highest level for 30 years. The Kingdom has now increased production by 1.1m b/d since January, meaning that OPEC has fully compensated for the loss of Libyan output. But high prices have also led to falls in consumption. Total demand for oil products in Asia fell by 500,000 b/d between May and June, declining from 20.6m b/d to 20.1m b/d. The decline was led by China, where oil demand fell by 1.5 percent between May and June. Overall, the IEA has trimmed its forecast of global oil demand this year by 100,000 b/d, saying it will average 89.5m b/d. "Sustained high oil prices and slowing economic growth have dramatically curbed global oil demand growth in recent months," said the report. Total growth in June came in at "zero", compared with 12 months earlier, although the IEA cautioned this was based on "preliminary data". The report added: "Concerns over debt levels in Europe and the US, and signs of slowing economic growth in China and India have spooked the market and raised fears in some quarters of a double-dip recession. From an oil market standpoint, perceived wisdom is that this must inevitably mean weaker oil demand to come." The IEA believes that global oil demand next year will average 91.1m b/d, or 1.8 percent more than 2011. However, this assumes world economic growth of 4.4 percent. If actual growth were to be 3 per cent, this would knock 1.3m b/d off the total, translating into global demand of 89.8m b/d. Helen Henton, head of energy research at Standard Chartered bank, said the IEA was still relatively "bullish" on this year's demand figure. "I expected demand to be trimmed by more this year. We're clearly seeing quite a significant slowdown at the moment, although in our view this is a slowdown not a double dip," she added. Total OPEC production stood at just over 30 million b/d, returning to levels seen before the loss of Libyan supply. In previous reports, the IEA had warned that OPEC was failing to produce enough oil to serve the global economy. Nonetheless, the report conceded: "With extra crude volumes now hitting the market after OPEC boosted supply and the IEA released emergency stocks, this has been sufficient to sharply weaken prices."
