In a recent Wall Street Journal article by Summer Said, it is reported that the world oil demand will not rise as quickly as expected. In 2014 it was thought that the world oil demand would rise significantly but recently that has been subdued by the “lower outlook” on the demand growth and economy around the globe. These had an extreme affect on the second quarter and resulted in the numbers falling to their lowest in over two years. This came from the West’s energy watchdog, the WSJ reports.
The growth was actually trimmed significantly. The monthly oil-market report from the International Energy Agency stated that its growth was cut down from the expected 1 million barrels per day to only 180,000 barrels per day. Consultants on oil policies in industrialized nations, the IEA mentioned the drop was from lower demand in the second quarter.
The numbers have remained low for the last two years as demand just isn’t where it used to be. The deliveries in both North America and Europe helped “slash” the estimate for demand growth in the country says WSJ and it kept the estimation down to below 700,000 barrels a day.
The IEA also said that the geopolitical risks are harming the market’s demand as well. The refining activity was weak in the second quarter and there was a quick stop in Chinese imports too. The report also mentioned that the oil market is actually better supplied than they first would have thought. Even with the conflicts in Ukraine, Libya and Iraq there is still some promise in the Atlantic basin.
Output has also risen. Saudi Arabia boosted their production. Supplies were recovered in Libya. And the organization of the Petroleum Exporting Countries were up 300,000 barrels per day in July to total 30.44 million per day. The kingdom was up 230,000 barrels per day to reach 10.01 million barrels in July. The number was the highest it’s been since last September. Libya nearly reached doubling its production at 430,000 barrels per day. The numbers greatly helped combat the offsetting of Iran, Nigeria and Iraq says WSJ.
Iraq has been experiencing militants in their northern half which is affecting their production numbers. While the WSJ labels the south as bottlenecked, it is expected that the north will be the largest obstacle for Iraq to overcome in delivering their expected supply.
Oil can also only be extended during one year on consensus after the European and U.S. sanctions on Russia. Following their annexation of Crimea, Russia isn’t getting much support in the oil market. Production is expected to meet the demand however. Even though the market is more at risk than it ever has been before, OPEC is confident it can deliver.