With more and more signs emerging all the time of an economic recovery taking root around the world, it was never going to take long before world oil demand forecasts started to look a bit more optimistic.
In its latest monthly report released November 12, the International Energy Agency confirmed this, raising its estimate of world demand in 2010 by 140,000 b/d to 86.19 million b/d.
The IEA said it was witnessing "surging demand" in China and Saudi Arabia as well as stronger-than-expected data in the US, the world's biggest oil consumer.
As a result, we are likely to see higher demand in the fourth quarter of 2009 than in the same period of 2008, which would mark the first year-on-year growth in oil demand since the second quarter of 2008.
But don't break open the champagne yet.
For one thing, the IEA hints that the apparent increase in demand might not be due to 'real' consumption patterns.
In China, the increase is showing up in the somewhat obscure 'other products' category, suggesting that it is a result of spending on infrastructure stemming from government stimulus measures. And in Saudi Arabia, it is more a result of bigger volumes of crude oil being burnt directly for power generation.
Neither of these is as reliable an indicator of 'true' demand as gasoil, which powers railways and trucks and is much more closely linked to economic activity, according to the IEA. And the gasoil picture is much less rosy, with world consumption expected to fall by 3.1% this year.
In addition, there is also the specter of high oil prices, which the IEA says pose two big threats if they contionue climbing -- firstly, they could jeopardize the general economic recovery, and secondly they are likely to have a more direct, dampening effect on oil demand.
In short, oil demand is showing signs of coming back to life. You can probably turn the life support machines off, but the patient is still under close observation.
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