The oil market is on a roller-coaster of uncertainty over debt, growth and political paralysis, and clouded by signs of a slowdown in China and India, the IEA said on Wednesday.
The International Energy Agency trimmed its estimate for global oil demand this year by 1,00,000 barrels per day because of a downward revision to demand in the second quarter, high prices and 'slowing economic growth.'
The IEA, the energy monitoring arm of the Organisation for Economic Cooperation and Development, said: 'Concerns over debt levels in Europe and the US, and signs of slowing economic growth in China and India have spooked the market and raised fears in some quarters of a double-dip recession.
'From an oil market standpoint, perceived wisdom is that this must inevitably mean weaker oil demand to come.'
The agency also commented: 'Arguably, political paralysis has played a greater role in the current situation than has the financial sector.'
The IEA meanwhile raised its 2012 forecast by 1,00,000 barrels per day, anticipating that Japan will increase its oil consumption to compensate for the loss of nuclear-generated electricity in the aftermath of the devastating March earthquake.
Japan is promoting efforts to reduce energy consumption, which the IEA estimated would fall by 4.5 per cent this year.
It also noted that of 54 Japanese nuclear reactors which usually cover for 27 per cent of demand for electricity, 'currently only 16 are online.'
Referring to a mixture of regular maintenance on other plants and pressures of public safety and new tests, it said that 'without a change in policy or maintenance schedules, all 54 reactors will be offline by May 2012.'
It said oil was on a 'big dipper,' with oil prices plunging $12-15 a barrel in about 10 days.
Warning that the outlook is very volatile, the IEA said 'August has a habit of springing both geopolitical and meteorological surprises, so the big dipper ride may still have further to run.'
It acknowledged that its assumption of global economic growth of more than 4.0 per cent in 2011-2012 'might seem optimistic in the present climate.'
Oil prices were firmer after the report was published.
Brent North Sea oil for September was up $3.95 to $106.50 per barrel and New York's main West Texas Intermediate light sweet crude contract for September was up $3.13 to $82.43.
On Chinese demand, a key issue in the last five years, the IEA said that 'for the first time since March 2009, China's monthly apparent demand ... contracted on an annual basis, falling by 1.5 per cent in June.'
This data, which should be treated with caution the agency said, was however in line 'with evidence that China's economy is also slowing down.'
Indian demand rose by 1.8 per cent in June, a notably lower rate than in the previous six months and 'the Indian economy has shown signs of slowing.'
Source : New Age
