Despite Iran’s saber rattling, the price of oil hasn’t soared. The price of a barrel of Brent has been hovering around $110 since last summer. That’s even after President Barack Obama signed a bill imposing tougher sanctions on Iran at the end of last year. The price didn’t go up after the Iranians publicly threatened to close the Strait of Hormuz and warned Saudi Arabia not to fill any expected gap in oil demand when the world stops buying Iranian crude. According to a report in today’s Al Arabiya News, Iranian boats with men armed with machine guns on board were recently sent to the waters near the Saudi oil-production areas. Yet the price of oil hasn’t budged much from $110. Spain’s foreign minister said on Monday that Saudi Arabia has promised that it will make up for supplies of oil lost as a result of EU sanctions on Iran, and will do so at the same price.
If it weren’t for all the saber rattling, the price of oil would probably be falling. Oil Market Intelligence just released the latest data for global oil demand through December. It is weak. While the 12-month average rose to a record high of 89.3 million barrels per day (mbd) last year, the growth rate fell to 1.1% y/y. That’s down from a recent peak of 3.4% during January 2011, and the weakest since April 2010.
Demand is especially weak among the Old World countries of the US, Western Europe, and Japan--where crude oil usage has slipped back down in recent months to the 2009 recession low. On the other hand, demand in the New World rose to a record high of 51.5mbd last year, exceeding Old World demand by 36%. The growth rate of the former was 2.8% last year versus a decline of 1.2% for the latter.
The weakest oil demand, not surprisingly, is in Western Europe. It dropped to 14.3mbd, the lowest since the end of 1994. It had peaked at a record 15.7mbd during the fall of 2006. Crude oil usage also turned down in the US during the second half of last year. The 12-month average was down to 19.0mbd during December from last year’s peak of 19.3mbd during March. (More for subscribers.)