The following story from the Guardian has caused quite a stir in the oil market on Tuesday morning:
The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying. The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.
What the Guardian is saying is that the IEA has been massaging its figures on account of pressure from the US government.
As Morgan Downey over at Scarce Whales points out, that’s a very grave allegation indeed; the IEA after all is an OECD taxpayer-funded institution.
But given the numbers of abrupt revisions the IEA has had to make to its forecasts of late would it be too much of surprise?
As the Guardian states the body is expected to publish its latest World Energy Outlook on oil demand and supply on Tuesday, with the market expecting some “substantial” downward revisions to its long-term forecast for global oil demand.
While this may be out of keeping with the idea that more bullish supply-side news has been held back, it makes sense in so much as over-stated supply figures will naturally make demand numbers more susceptible to sharp revisions to the downside in the event of falling global demand.
You see whatever the IEA’s alleged stat-massaging might prove about the world having hit peak oil, what it reflects for the here and now is that global demand has retracted to such a level that over-stated supply figures can no longer be easily disguised.
JBC Energy reflects this very well in the following chart, which glaringly shows how out of keeping the IEA’s demand figures have been with other industry projections:
All that said, WTI Nymex crude futures, if anything, fell on the story to about $79 per barrel on Tuesday — implying demand factors may still be outweighing future supply issues for the front-end of the market at least.