Oil market projections could be too optimistic

IEA and Opec projections for strong demand growth in 2014 rest on assumptions for economic growth that could prove far too optimistic

The International Energy Agency (IEA) and Opec don’t always agree. But in their monthly oil-market reports issued this week they are singing from the same hymn sheet. The world economy is coming out of the trough, they believe, and oil demand next year will rise quickly. If that sounds bullish, beware the details. The IEA’s outlook rests on IMF forecasts for the global economy that have already been downgraded. Both the agency and Opec also think non-Opec supply will rise more than demand next year. Neither of them has factored in the recent surge in oil prices, either. Both think Opec’s share of the market will slide still further. Things could get bumpy in the market in 2014. The IEA says