Think tank cautious on rising oil demand

UPI | NOVEMBER 2010 | SOURCE: UPI.com

Rising oil demand figures for the third quarter of this year are more about shifting inventories and stocks than actual increases in end-user consumption, the London Center for Global Energy Studies said Monday in its Monthly Oil Report.

CGES struck a cautionary note after reports that global oil demand rose more than 3 million barrels a day in the July-August quarter. News of the rising demand had raised optimism that it could be pointing to a significant return to global economic recovery.

Think tank cautious on rising oil demand

Global oil demand could grow by around 1.3 million barrels per day in 2011 but CGES said it didn't expect growth in oil use by the OECD countries, which include the United States, Canada, Japan, Australia and New Zealand and most of the industrialized European Union. Chile, the only Latin American member of the OECD, has been struggling with the aftermath of the February earthquake.

Growth of actual demand remains subdued among the developed economies, "which are still facing a very uncertain economic outlook," CGES said in a reference to figures from the industrial economies grouped in the Organization for Economic Cooperation and Development.

The center cited several key elements of uncertainty that could impact on the global energy -- particularly crude oil -- scene. These include the unfolding new crisis in the eurozone, which led to heavy borrowing by Ireland and continuing political and security problems in Iraq, Iran and Nigeria.

Oil watchers would need to look for signs if the third-quarter surge in oil demand loses momentum or continues through the end of the year, said the center.

CGES said the "huge surge in apparent global oil demand" had ended 10 consecutive quarters of global building of crude oil stocks. But it said the reported increase in oil demand of more than 3 million barrels a day actually "reflects a movement of stocks along the supply chain, rather than a surge in end use."

It said the rate of growth in demand could actually ease once refiners finished replenishing their stocks. CGES also discounted an immediate possibility of oil prices rising further.

"As long as spare capacity throughout the supply chain is used as needed, oil prices should remain around current levels next year," CGES said.

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