IEA raises 2005 global oil demand
Agence France-Presse, Paris
Demand for oil this year will be higher than expected because of cold weather, expected robust growth in the United States and consumption in China, the International Energy Agency (IEA) forecast on Friday.
The agency raised its estimate for global oil demand in 2005 by 330,000 barrels per day (bpd) to 84.3 million bpd.
It revised upwards its estimate of global demand for oil from the Organization of Petroleum Exporting Countries (OPEC) this year by 200,000 bpd to 28.6 million barrels. This was half a million barrels more than the 2004 global demand figure of 28.1 million barrels.
"The revision is most pronounced in the first half of 2005, before higher non-OPEC output takes effect," the report said.
But it also said that in February world supply had surged by 885,000 bpd to 84.3 million barrels.
The IEA, the energy monitoring arm of the Organization for Economic Cooperation and Development (OECD), published its monthly report against a background of a recent surge in oil prices and concern that the market is set to be tight for some time, and even years.
There is a growing belief that high oil prices could increase the risk of inflationary pressures and therefore vigilance by central banks about any need to increase interest rates.
The agency said: "Cold weather in the northern hemisphere has caused a surge in demand. Heating fuel prices have tightened globally, but more significantly in Europe and Asia."
The IEA also remarked: "The reality is that oil consumption has caught up with crude and refining capacity.... If supply continues to keep up, more policy attention may come to be directed at oil demand intensity in our economies and alternatives."
It also said: "Recent reports indicate that the U.S. economy is more likely to carry the momentum that has built in the latter part of 2004 into the first half of 2005. On the whole, U.S. demand growth is revised upwards by 120,000 bpd."
"China's demand growth has been revised upwards by 100,000 bpd," the IEA said, arguing that one reason why oil demand remained high despite high prices was that high oil prices were pushing labor-intensive activities to areas where labor costs were low. But this involved transportation costs.
"A more robust U.S. economic outlook should boost China's exports and help sustain this trend," the IEA said. The Chinese government was also increasing efforts to counter "the construction of non-approved power projects, mostly coal-fired... this pressure could have a marginal impact on oil consumption".
Although the growth of demand for oil by China was expected to slow in 2005 from the rate of growth in 2004, strength of the U.S. economy had caused the IEA to increase its estimate of Chinese demand growth by 100,000 bpd in 2005.
Overall: "The latest OECD data show that, while U.S. stocks were building in January, crude inventories were drawing in in Europe and, to a lesser extent, in the Pacific/Asia region. Anecdotal evidence also suggests stock draws in non-OECD Asia over the month, particularly in China."
Supplies by members of the OPEC rose by 390,000 bpd in February to 29 million bpd owing to increased production by Kuwait, Nigeria, Saudi Arabia and Iraq.
The IEA said it was revising up its estimate of supplies from non-OPEC countries by 75,000 bpd for last year and by 90,000 bpd this year. "It averages 51 million bpd this year, 925,000 bpd above 2004."
In February, production by non-OPEC countries rose by 445,000 bpd on a recovery of output in North America and from the North Sea. Output by Russia rose after a four-month decline.
The agency commented: "Cold weather and strong global demand pushed benchmark IPE Brent and spot Dubai crude prices to record levels in early March, reaching US$54.3 per barrel and $45.47 respectively.
"Distillate and jet fuel prices were also strong globally, but particularly in Asia and Europe, where temperatures were below seasonal norms."
Stocks held by industry in the area covered by the OECD fell by 3.0 million bpd in January to 2,573 million barrels, closing 66 million barrels above a year ago.
"Upward revisions to OECD demand for the first quarter of 2005 kept forward cover steady at 51 days," the report said.
And U.S. gasoline stocks amounted to 224 million barrels at the beginning of March, an increase of 21.5 million barrels on a 12-month comparison.