Desperate bulls won’t get much relief from the IEA, which has kept its 2009 oil demand growth forecast steady.
However its latest monthly oil market report is rather more optimistic on 2010; the demand forecast was upgraded from 1.4 per cent growth to 1.7 per cent, making next year look rather positive:
If you think it looks too optimistic, however, the IEA points out that the 2010 forecast is based in part on a rebound from a sharp fall in 2009. They add it:
…is predicated on the basis that global financial and trade imbalances gradually improve and fuel economic activity, notably in emerging countries. The forecast also assumes normal winter conditions and the prevalence of administered price regimes, notably the Middle East.
2009 still grim
The picture for this year is unchanged however. After an ever so small increase last month in its 2009 demand forecasts – the first upward revision after nine months of reductions – the IEA is this month maintaining its forecast for demand growth 2.9 per cent lower than 2008.
OECD inventory cover is slightly higher – at 62.5 days – and, despite the upbeat sentiments of the past two months, the agency says poor data from the past two weeks has dampened down any chances of optimism:
Furthermore, the most recent developments (notably the dwindling prospects for the driving season in the US and the continuing poor state of the distillate market) arguably indicate that oil product destocking had a much lesser effect upon weak demand readings that some had anticipated. Destocking is probably largely over by now, yet demand data in key countries (predominantly the US) have if anything worsened in the past few weeks.
Last month’s report did point out that much of the upward revision was due to product restocking, so the above lines don’t augur well for the rest of the year.
And even China won’t help:
We thus remain sceptical regarding the much‐trumpeted, strong 2H09 demand rebound, even if China exceeds expectations. Indeed, as much as 2H09 demand is set to improve, the importance of China regarding global oil demand growth, albeit significant, should not be overplayed, at least at this juncture.