Some of the latest statistics from the International Energy Agency give a very clear indication of the current state of the world oil market, but some leave a lot more room for interpretation.
First the easy part--demand.
In its new monthly oil market report Tuesday, the IEA took the axe to its demand projections and warned there could be more cuts to come.
In addition to bad news from North America, the IEA report also contained some sobering data from Europe, where demand for oil in some of the biggest economies--Spain, Italy and France--all fell in March by nearly 6% from February's levels.
The scale of this decline could have been exaggerated by the fact that the Easter holiday fell in March this year, but it doesn't look good, and overall demand from the rich countries that make up the OECD is now expected to fall by 330,000 b/d this year.
On the other hand, demand is still growing elsewhere, notably in China and India.
The supply outlook is also fairly clear, and offers little prospect of a respite from high prices in the short term.
Non-OPEC production so far this year has consistently fallen short of expectations, the IEA said, and is not expected to change much until the end of the year, when a big jump is forecast.
The picture is more complicated when it comes to stocks, one of the IEA's specialist subjects.
The agency says consumer countries are right to call for OPEC to pump more oil to ease prices, arguing that this would allow a more rapid build in stocks. At the same time, the IEA alluded to the market's desire to see higher stocks as one reason prices have risen in a supply-constrained market.
But the numbers themselves tell a slightly different story. OECD stocks, which normally fall during the first quarter to help meet peak demand, only declined by 200,000 b/d during the first three months of the year, half the normal rate.
And not only are stocks already above five-year average levels, but OPEC is currently pumping more than the implied 'call' on its crude. All else being equal, this should already be helping stocks to build and, perhaps, prices to ease. It just doesn't seem to be working out that way yet.
Why is it considered "bad news" when demand slows? That seems like good news for consumers and the environment, and likely means people are using gas and oil more efficiently and wasting a lot less. Perhaps it would be better for everyone if the writer simply wrote the facts and let the reader decide what was good or bad.
Good point, I was not trying to say that a drop in demand per se was 'bad news' but rather that it could be if it is a result of the ongoing economic slowdown. I am sure consumers would love to see prices come down as a result of increased supply, but if oil demand is slowing as a result of wider problems in the general economy I think they are unlikely to be as happy.
As you suggest, there are now signs that demand is also being eroded as a direct result of high prices in some countries, rather than as an indirect result of wider economic malaise -- this has taken a while, partly because end-user oil prices are subsidized in much of the world.