Oil Price Slumps as IEA Cuts Demand Growth Forecasts
London (Sept 13) Oil prices tumbled Tuesday after the International Energy Agency warned that global demand for oil is growing slower than it previously thought.
"Demand growth is slowing at a faster pace than initially predicted," the Paris-based agency said as it cut its forecast demand increase for 2016 by 100,000 barrels a day to 1.3 million barrels, and its 2017 growth forecast by 200,000 barrels per day to 1.2 million barrels.
"Recent pillars of demand growth - China and India - are wobbling," the IEA wrote in a note. "After more than a year with oil hovering around $50 a barrel, the [economic] stimulus from cheaper fuel is fading."
Oil prices were down sharply Tuesday. Brent Crude traded at $47.36, down $0.96 or almost 2%, while the key U.S. benchmark of West Texas Intermediate fell to $45.22, down $1.07 or 2.3%.
The new forecasts will add to pressure on OPEC countries to curb production increases when they meet later this month in Algeria. Saudi Arabia, the cartel's biggest producer, and its economic and political rival Iran have been sparing over the possibility of a so-called "production freeze", which would cap output at current levels.
Analsysts, including Goldman Sachs, have warned that such a freeze would not be enough to boost oil prices, noting that current output will continue to outweigh demand into 2017.
Those predictions were give credent by the IEA, which noted on Tuesday that OPEC output of 33.47 million barrels per day in August was close to all time records.