The IEA warns of tightening oil market on stronger than expected Chinese oil demand growth and reduced supply from Saudi Arabia. IEA now estimates global oil demand grew by 975,000 bpd in 2012, up from a previous estimate of 850,000 bpd. For this year, it forecasts demand growth of 930,000 bpd. The acceleration in Chinese oil consumption in the final months of last year, after months of low growth, surprised with its velocity.
This increase in expected demand growth leads to increased need for OPEC oil. But OPEC production has fallen sharply over the past two months as Saudi Arabia cut supply. Saudi Arabia insists the cut is in response to reduced demand from refiners, not to push oil prices higher.
Algeria has been a consistent supplier of energy to the west since the 1960s, never allowing wars, political disagreements or trade disputes to halt the flow of oil and gas. But the dramatic hostage crisis at the In Amenas gas field, in which dozens of Islamists and hostages were killed, is threatening to undermine economic growth prospects. This may have caused Algeria’s brutal response to the hostage-taking.
International oil companies have pulled all non-essential personnel out of the country. It is uncertain how many companies will be willing to come back after the attack. Insurance and security costs for companies doing business in the country will inevitably rise.
Gas prices remain strong as weather forecasts show no relief from the cold in the coming days.
Gas flows from Algeria to Italy via the Transmed pipeline dropped last week due to the terrorist attack on the In Amenas processing plant. Imports to Italy were down from 75.3 mcm/d to 62 mcm/d. There have also been some disruptions to flows to Spain through the Maghreb-Tarifa and the Medgaz pipelines. The In Amenas plant and field produce around 24.6 mcm/d. BP has confirmed that its larger Algerian facility at In Salah was still producing, but with heighthened security. Algeria produces around 78 bcm of gas, of which 28 bcm is consumed domestically (2011 figures).