Oil prices are unlikely to fall much further over the balance of this year but could come under pressure in 2013 as the global economy falters due to slower U.S. and Chinese growth, the IEA said Thursday.
The International Energy Agency, which advises developed countries on energy policy, said supply risks appeared to have put a floor under prices for this year even as global economic growth slows.
However, for 2013, oil prices could fall in real terms by more than 7.0 percent, based on current models and futures contracts, it said, adding that such a downturn should marginally support demand.
Global economic growth this year will likely come in at 3.3 percent, down from the previous estimate of 3.5 percent as an “exceptionally challenging macroeconomic backdrop” forced the IEA to change its forecasts.
For 2013, the global economy should grow 3.8 percent, down from the previous 4.1-percent estimate based on figures in April from the International Monetary Fund, it added.
“Concerns are mounting on the sustainability of the eurozone, there has been a definite easing in China’s economic impetus and the U.S. outlook has weakened,” the IEA said in its latest monthly report.
“Ongoing debt concerns across the developed world will likely see associated austerity measures curtailing government, business and consumer expenditure levels alike,” it said.
The IMF is expected to issue new economic growth forecasts shortly.
Oil prices were slightly easier, with New York’s main contract, light sweet crude for delivery in August, down 34 cents to $85.47 a barrel.
Brent North Sea crude for August shed 22 cents to $100.01, having fallen as low as $89 in late June after hitting highs in March of around $125.
In terms of oil demand, the IEA left its 2012 growth forecast at around 800,000 barrels per day (bpd) to around 89.9 million bpd, with 2013 gaining a “relatively muted” 1.0 mbd to 90.9 mbd, led by Asia.
The increase next year, while marginally more than the expected 2012 gain, was much less than would have been expected based on trends before the 2008 global financial crisis brought the economy to its knees, it said.
The eurozone debt crisis has since undercut growth further.
The IEA said that total global oil supply in June was down 500,000 bpd to some 90.4 mpd, with OPEC production slipping 100,000 bpd to 31.8 mpd.
Among OPEC members, the IEA noted that Iranian output had slumped to near 22-year lows at 3.2 mbd in June, down 100,000 bpd from May as United States and EU sanctions ramp up from July 1.
However, despite the fall in output, the IEA noted that Iran exports to China had increased substantially by 300,000 bpd to 800,000 bpd and said it was now harder to track Iranian production and shipments.
The U.S. and EU imposed tougher sanctions on Tehran over its nuclear energy program, claiming it is a cover for atomic weapons development, a charge Iran consistently rejects.
On Wednesday, OPEC left its world oil demand forecast for 2012 unchanged at 88.68 mbd, putting 2013 at 89.50 mbd, up 820,000 bpd and compared to the 890,000 bpd gain expected in 2012.
Like the IEA, the Organization of Petroleum Exporting Countries also cited the uncertain economic outlook for its cautious assessment.
Oil came under pressure early Thursday after the IEA released its report. In London, Brent crude for August delivery was down 40 cents at $99.83 a barrel by 12:50 p.m. EDT (1650 GMT) after dropping to an early low of $98.51. U.S. August crude was down 70 cents at $85.11, after falling to a session low of $84.21.