Oil may be saying recession is receding: IEA


July 15, 2010 Updated Jun 14, 2009 at 9:41 PM CDT

Oil may be signalling that the global recession is on the turn, the IEA said on Thursday, raising its estimate for overall demand for the first time for many months.

The data suggested that this slight upward boost came from leading industrialised economies, and particularly from activity in the United States.

A recent 20-dollar surge in the oil price and unexpectedly strong US consumption were among signals that the recession may be receding, the International Energy Agency said in its June report.

Some of the price rise was driven by investors on futures markets anticipating trends on stock and money markets, and the price surge appeared "difficult to justify from fundamental factors alone," the IEA warned.

But overall data did suggest that industrial demand was picking up while consumption by the transport and services sectors remained depressed.

"While rapid price swings can prove destabilising, higher prompt prices, if symptomatic of a gradually recovering global economy, in themselves may be no bad thing," and might encourage investment in oil production.

Raising its estimate for global oil demand this year by 120,000 barrels per day from the figure in the May report, the IEA said this reflected "stronger-than-expected early-year OECD demand."

It said its revisions "do not necessarily imply the beginnings of a global economic recovery, and may only signal the bottoming out of the recession."

It said: "While the bull run in prices since mid-February was largely driven by market sentiment that a recovery in the global economic outlook was nearing, the latest surge in crude oil markets was partly fuelled by signs of slightly stronger fundamental factors."

Global oil demand was now estimated to be 83.3 million barrels per day this year, a fall of 2.5 million barrels per day or of 2.9 percent from the level last year.

The IEA, the energy-monitoring arm of the 30-nation Organization for Economic Co-operation and Development, said it had raised slightly its estimate for OECD demand this year to 45.2 million barrels per day, to show a fall of 2.3 mpd or 4.9 percent than last year.

This was 120,000 barrels per day higher than previously expected.

The agency also said it had revised upwards OECD consumption in March by 650,000 barrels per day, to show a fall of 3.2 percent over 12 months instead of 4.5 percent calculated earlier. Three quarters of that revision was attributable to the United States.

However some of this might reflect a rebuilding of oil held by industry in inventories, and the IEA said it was not factoring all such revisions into its estimates until stronger evidence emerged.

The agency said that members of the Organization of Petroleum Exporting Countries had raised their output again in May, by 160,000 barrels per day to 28.4 mpd.

And the so-called OPEC-11 countries had raised output by 110,000 bpd to 26.0 mpd, or 1.1 mpd above the OPEC target of 24.85 mpd, confirmed at a meeting on May 28.

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