Trying to forecast world oil demand growth is a tricky job at the best of times. This year abnormal levels of uncertainty about the global economy are making the job even more difficult.
Leading energy demand forecasting agencies last week were divided on whether the prospects for demand growth are improving or deteriorating.
The three - the International Energy Agency (IEA) for consumer nations, the Organization of the Petroleum Exporting Counties (OPEC) and the U.S. government's Energy Information Administration (EIA) - have long struggled to accurately predict global oil demand changes.
Last week, the IEA cut its 2012 forecast for a sixth consecutive month to growth of less than 1 percent, or 0.8 million barrels per day.
But the EIA raised its forecast to 1.32 million bpd.
Some analysts question whether some of the estimates have been cut too deep, too fast and say 2012 may yet surprise on the upside should the economy pick up.
There is general confusion at the moment about what is happening to demand, said Will Riley, co-manager of the Guinness Atkinson Global Energy Fund.
There does seem to be a discrepancy between dropping oil inventories and the demand picture, which the IEA are presenting.
The performance of previous forecasts supports any doubts about their accuracy.
If you look at the charts, in the past years ultimately everybody got it wrong, said David Wech from JBC Energy.
Two years ago, a steep recovery in demand in 2010 after a global financial crisis caught everyone by surprise, and what at first looked like a more predictable 2011 proved no less challenging.
A year ago the three agencies were all forecasting 2011 demand to grow by more than 1.5 percent, or 1.4 million barrels per day, after a stunning 2.75 million bpd of growth triggered by global stimulus spending in 2010.
But growth for 2011 came in at only a half that level, and the onset of yet another wave of economic uncertainty and a debt crisis from the middle of last year prompted all three forecasters to start slashing growth estimates for 2012 from initial levels in August of 1.6 million bpd for the IEA and EIA and 1.3 million for OPEC.
OIL PRICES RESIST
Given that all forecasters estimate that OPEC is pumping way above the current market need, it would be logical to predict the world might be heading for a large crude oversupply and potentially an oil price crash.
Oil prices, however, show stubborn resistance and are holding at historical highs on an annualized basis, which analysts say is partly due to fears about supply losses from Iran and a new influx of cheap money into commodities but equally to a less bearish view about future demand growth.
James Zhang from Standard Bank said he believed the IEA's forecast was too focused on the developed countries and that it underestimated growth from emerging economies.
While the current price level for Brent is overstretched in our view, driven by a fresh wave of investment into the oil market, it is likely to prove to be a mistake to take IEA's demand forecast as a bearish signal for the medium term, he added.
On the downside, the fact that oil prices are stubbornly holding at record highs cannot be good for global demand.
Consumers are adjusting their behavior, it is clear to everyone, but it is very difficult to observe in forecasts, said Wech, who is among the biggest pessimists for this year's demand growth, foreseeing 0.6 million bpd.
The U.S. economy looks a bit better recently, but I would still be cautious about it, he said. But things that are not included in the forecasts are usually much more often on the upside.
Wech added that most forecasts are a reflection of global economic predictions by the International Monetary Fund (IMF) and are therefore slow to realize the economy might be turning a corner.
The IEA has to use the IMF forecasts, and they came out all bearish, and it doesn't reflect the fact that things seem materially better, agreed Seth Kleinman from Citi.
It seems like the IEA is the laggard and that they will revise their forecasts up rather than down. It doesn't feel like we're in a massive supply glut, he said.
(Reporting by Dmitry Zhdannikov, Claire Milhench, Simon Falush, Christopher Johnson, Zaida Espana and Alex Lawler, editing by Jane Baird)