PARIS (AFP) – Global appetite for oil will grow at a slower pace in 2015 than earlier thought despite plunging crude prices, the IEA said on Friday, warning that further price drops heightened the risk of social instability in oil producing countries like Russia and Venezuela.
Oil demand for 2015 was now expected to grow by 0.9 million barrels a day to reach 93.3 million barrels, some 230,000 barrels less than the previous forecast, it said in its fourth downward revision in five months.
Crude prices have collapsed by more than 40 per cent since June, and are now trading around $60 – levels last seen five years ago, as increased US shale production adds to oversupply.
But the cheap oil was not prompting more consumption.
“It may well take some time for supply and demand to respond to the price rout,” it said.
Market share lost to renewable energy sources was unlikely to be replaced again by cheaper crude, the IEA said.
In the OECD rich countries, “a tepid economic recovery, weak wage growth and deflationary pressures will further blunt the stimulus of lower prices,” it added.
Any boost that cheaper crude could give to oil importing economies would be offset – if not more than offset – by the damage done to oil producers.
In focus is Russia, which is hammered by the double whammy of sliding oil revenues and Western sanctions.
The IEA said it was making the biggest cut to Russian demand, now expecting it to drop to 3.4 million barrels a day, 195,000 barrels below last month’s estimate.
“Lower oil prices significantly dent potential export revenues in net oil exporting countries, slashing their income streams and in turn denting demand.
“In particularly cash-strapped economies, such as Venezuela and Russia, this impact is likely to be magnified as the risk of default escalates,” said the IEA.
“The resulting downward price pressure would raise the risk of social instability or financial difficulties if producers found it difficult to pay back debt,” it added.
Russia has said that it is losing up to $100 billion a year due to weak crude prices. But that was in November, when crude was trading at around $80.