IEA cuts oil demand growth forecast prices continue to plunge

Investors are hoping next week will bring brighter news on the markets, but all indications are that they’ll be heading into the weekend on a sour note.The price for WTI crude oil hit a five year low overnight and was still sliding as the markets opened Friday morning after the International Energy Agency (IEA) cut its oil demand growth forecast.The new estimate is for 93.3-million barrels a day for next year, down from November’s prediction of 93.6-million barrels a day.It warned weak demand and oversupply in oil markets will raise the risk of global social instability and the potential for financial defaults.Stephen Shork, Editor of The Shork Report, told 660News that’s a big concern.“We look at Japan which is in a recession for the fourth time in seven years, demand from China is down with the property slump there, Europe is hanging on but those economies are pretty close to recession,” he said.Russia and Venezuela were highlighted as being particularly vulnerable, with the report saying both countries are at facing a serious risk of default.Shork said Venezuela, for example, has not properly invested oil revenues from the state-run companies.“The Credit Default Swap market has predicted a probability that country will default of 99 per cent within the next year, so to stave off a potential default, that country will have to produce because it is starved for cash,” he explained.He added major North American oil producers are insulated from default, but there are still concerns, especially in the U.S.“A lot of this production was leveraged on shale based on prices of upwards of $90 a barrel, and now Canadian Western Select is trading around $40 a barrel,” he said, explaining the only thing cash strapped companies can do is keep producing, which doesn’t help the problem.Global oil inventories are projected to build by around 300 million barrels in the first half of 2015 and it’s estimated oil stocks in major global economies could start to hit up against storage capacity limits.The IEA report comes as provincial finance ministers prepare for their first face-to-face meeting with federal counterpart Joe Oliver this weekend.It’s expected they’ll discuss falling oil prices – but they’ll do so without the minister from Alberta.A spokesman for Robin Campbell says he is too busy grappling with the low prices to attend the meeting in Ottawa and will instead send a department official and will try to set up a one-on-one between Campbell and Oliver in the near future. AddThis Sharing ButtonsShare to TwitterTwitterShare to FacebookFacebookShare to RedditRedditShare to 電子郵件Email by News Staff Posted Dec 12, 2014 8:16 am MDT IEA cuts oil demand growth forecast, prices continue to plunge read more