IEA estimates 1pc growth loss to US economy: Storm-driven oil shock
PARIS, Oct 11: The oil shock from the Katrina and Rita hurricanes is blowing itself out but has set back the US economy in the third quarter, the International Energy Agency estimated on Tuesday.
US economic growth may have been “hit” by a full percentage point in the third quarter but was showing signs of recovery, the IEA said.
The release of oil and oil products from stocks together with market flexibility had absorbed much of the hurricane disruption, the IEA said in its monthly report.
But official bodies might have yet to take more measures to ward off possible strains in energy markets, it said, in an apparent reference to a possible further release from stockpiles.
Oil and gasoline prices were now lower than before the two storms closed down oil facilities in the Gulf of Mexico and disrupted US oil infrastructure, and the price of heating oil had fallen almost to the level at the end of August.
But the hurricanes had battered overall confidence in the United States.
“As a consequence, third-quarter gross domestic product growth may be revised down by as much as one per cent versus pre-hurricane projections,” the report on September market conditions commented.
“Looking forward, however, an economic rebound is expected as rebuilding begins and the latest data suggest that US manufacturing activity continues to grow.”
The report gave a broadly reassuring picture, given what it described as “severe damage” to upstream infrastructure and “inoperable” pipelines, processing plants, terminals and refineries.
Traders said that the IEA’s assessment of a decline of demand was less than had been expected, and Calyon analyst Mike Wittner in London said that the report was broadly “bullish for the market”.
The IEA estimated that the hurricanes might cut oil production by 77.0 to 104.0 million barrels a day from September to December, and output of liquefied natural gas by 13.0-18.0 million barrels.
Hurricane damage had closed off 1.2 million barrels a day of oil production in the US Gulf region in September and the hurricanes had a “substantial” effect on reducing demand.
US demand for oil products had fallen by an estimated 2.3 per cent in September on a 12-month comparison, and demand for gasoline fell by 2.4 per cent
The IEA reduced its forecast for growth of global oil demand this year by 90,000 barrels a day to 1.26 million barrels a day.
In 2006, demand would grow by 1.75 million barrels a day owing to a rebound from “the largely temporary impact of Katrina and Rita and a recovery in Chinese demand”.
Global demand for oil this year would be 83.4 million barrels per day, an increase of 1.3 million barrels a day, or 1.5 per cent over the 2004 figure, the IEA said. This amounted to a slight reduction of 0.1 per cent from its estimate in September.
Global demand next year would be about 85.2 million barrels per day, equivalent to an average increase of 1.7 million barrels a day or 2.1 per cent more than this year. This was a 0.1 per cent cut in the September estimate.
Regarding China, the IEA said that it was holding its downward revision of 10,000 barrels a day for demand this year, and revising demand downwards in 2006 by 40,000 barrels per day.
Chinese demand seemed to be “stabilizing” because the government was limiting exports of oil products to increase domestic supplies.
However, Chinese apparent demand, a calculation that allows for mismatches between imports and exports, was expected to grow by “only 3.2 per cent” this year, but then “rebound to 7.0 per cent in 2006”.
Japanese demand had been “exceptionally weak” in August, possibly because of the effects of Typhoon Mawar on August 26.
Global markets had “adjusted rapidly to the hurricanes” but recovery was conditional on many factors and “policy makers may need to offer a further helping hand”, the IEA said.
World oil supply had fallen by 845,000 barrels a day in September to 83.8 million barrels a day. —AFP
