Sluggish global economic growth is crimping demand for oil, including in China, the International Energy Agency said yesterday. "Relatively sluggish macroeconomic conditions are expected to keep a lid on growth in 2013," the IEA said.

The agency trimmed slightly its forecast for oil consumption, saying demand would expand by 785,000 barrels per day this year to 90.6 million barrels per day. This marked a fall of 0.08 percent from the previous forecast.

While emerging countries led by China have driven oil growth in recent years, the IEA said "there are mounting signs that China's oil use, like its economy, may have shifted to a lower gear."

It now sees Chinese oil demand growing 3.8 percent instead of 3.9 percent this year, in line with a recent cut by the International Monetary Fund of its forecast for Chinese economic growth to 7.75 percent instead of 8.0 percent. It also pointed to the latest survey data showing shrinking manufacturing output in China last month.

Nevertheless demand for oil from emerging and developing economies is set to exceed demand by advanced economies in the 34-nation OECD club this quarter, the IEA said, although they will not hold that position consistently until next year.

Oil markets, like equities markets, have been hit by sharp swings in recent weeks by the prospects of reduced monetary stimulus by central banks as economic growth picks up. However, the IEA confirmed its outlook for rising oil demand for the rest of 2013 as the recovery picks up steam.

"While demand is projected to remain relatively sluggish overall, growth is expected to gain momentum through the end of the year ... as the underlying macro-economy strengthens," said the Paris-based agency which advises oil consuming nations.

It said both oil demand growth and the underlying economic expansion were expected to show their weakest growth in the current quarter.

In Asian trading yesterday, oil prices fell in line with equities as traders were still preoccupied with the Bank of Japan's decision to hold off unveiling any fresh economic stimulus, analysts said.

New York's main contract, light sweet crude for delivery in July, dropped 83 US cents to US$94.55 a barrel and Brent North Sea crude for July delivery shed 53 US cents to US$102.43 in early afternoon trade in Asia.

Meanwhile oil supplies edged lower on a monthly basis to 91.2 mbpd, mostly due to Canadian maintenance operations, but were still up on an annual comparison. Supplies by the OPEC rose to a seven-month high of 30.89 mbpd in May.