Oil demand in developed countries is under pressure from high prices, reports the IEA. David Sheppard reports for the Financial Times that IEA analysts believe that “Soaring fuel costs and a deteriorating economic environment are slowly starting to moderate oil demand growth in the OECD.” He writes:
Record fuel prices are hitting oil demand in developed countries harder than anticipated, the International Energy Agency warned on Wednesday, in the latest sign of inflationary pressures forcing consumers to cut back.
Paris-based IEA, which is primarily funded by OECD members, said that growth in oil demand was slowing as the global economy faltered, but cautioned that the oil market was “walking a tightrope” of uncertainty given threats to supply in Russia.
“Soaring fuel costs and a deteriorating economic environment are slowly starting to moderate oil demand growth in the OECD,” said the IEA. “Oil demand in the OECD contracted in April, with the Americas, Europe and Asia all posting larger than normal seasonal declines. Road fuels were impacted the most, suggesting that record prices have begun to afflict demand.”
The IEA’s latest assessment comes after oil prices pulled back in recent weeks, declining from $120 a barrel to near $100 a barrel. But the industry remains deeply divided over whether the price slide will continue.
Opec, the cartel of oil producers, presented a forecast earlier this week that implied demand for its oil would far outstrip its production capacity next year, while the outlook for Russian supplies remains highly uncertain, with western sanctions over Moscow’s invasion of Ukraine set to intensify later this year.
Many traders are looking for signs that oil demand is cooling, however, with the picture complicated by the rebound in activity after the peak of Covid-19 restrictions. While developed economies may be slowing, areas including aviation are picking up, making it even more challenging than usual to gauge the strength of oil consumption.
The IEA said oil demand fell in April by 1.6mn barrels a day in the OECD — a decline that was roughly twice as large as the typical seasonal pattern.
But on a global level, that trend was offset to an extent by rising demand in Asia.
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