The projected pace of global oil demand growth in this month's Outlook reflects less optimistic assumptions about the global economy. The forecast for global economic growth was lowered by 0.1 and 0.6 percentage points in 2012 and 2013, respectively, from last month's Outlook, and is now expected to average 2.9 percent in both years. The weaker growth outlook is prompted by increased economic concerns about the debt crisis in Europe and indications of slowing growth in China, both which could have spillover effects on other economies. The global liquid fuels consumption growth forecast for 2012 was lowered to 0.7 million bbl/d from 0.8 million bbl/d in last month's Outlook. Projected global consumption growth in 2013 was lowered by 0.4 million bb/d to 0.7 million bbl/d.
EIA recently released its recurring 60-day report on The Availability and Price of Petroleum and Petroleum Products Produced in Countries Other Than Iran. As noted in the report, oil markets have loosened over the last several months, which is reflected in a sharp decline in crude oil prices and backwardation since the end of April. EIA's historical supply and demand balance also shows signs of a looser market, as supply outpaced consumption by an average of 1.1 million bbl/d for the first half of 2012, and stocks built counter-seasonally during the first quarter—a marked contrast to significant stock draws during 2011.
EIA's downward price revisions reflect shifts in expectations about oil market balances and the additional downside risks that are currently dominating market sentiments. However, there are both upside and downside uncertainties. The possibility that the economic situation in European Union (EU) countries could deteriorate further poses a downside risk to global oil demand and prices, though the market's positive reaction to recent EU negotiations serves as a reminder that oil prices will fluctuate in both directions as perceptions about the likelihood of a deeper crisis evolve. In the current Outlook, consumption in Europe is expected to fall year-over-year by 0.3 million bbl/d in 2012 and by a further 0.4 million bbl/d in 2013. The prospect of slower growth in China, which has been a key driver of increased oil demand in recent years, could also curb demand. China's weakening exports, particularly to Europe, and slower industrial and domestic growth experienced in the first half of 2012 could continue to place downward pressure on oil prices. EIA currently projects annual increases in consumption in China of about 0.4 million bbl/d in both 2012 and 2013. On the supply side, oil prices could be higher than projected in this Outlook if recoveries from supply disruptions are slower than forecast, additional disruptions occur, or supply growth is lower than expected.