Oil demand, supply rise, OPEC flush with spare capacity: IEA

December 10, 2010 | 20:04
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Global demand for oil is stronger than expected as the northern hemisphere ends the year in an icy grip, the IEA said on Friday, raising its estimate for demand in 2010 by 130,000 barrels per day to 87.4 million barrels per day.

The International Energy Agency raised its estimate of total oil demand next year by twice as much, or by 260,000 barrels per day to 88.8 mbd "on stronger data from OECD North America and non-OECD Asia."

However, "global demand growth should ease in 2011, from 2.5 million barrels per day to 1.3 mbd, amid renewed structural OECD decline, and as post-recession froth in markets like China subsides."

But in November, global oil supply rose by 400,000 barrels per day to 88.1 mbd "its highest ever level, largely on increased non-OPEC production," the IEA reported.

The IEA said that the oil products futures markets pointed to a medium-term oil price range of about 75-85 dollars per barrel, as it had outlined in its outlook in June.

It said that 16-member Organization of the Petroleum Exporting Countries seemed unlikely to change output targets at its meeting in Quito, Ecuador, on Saturday but "may come under pressure to increase supplies to the market in the new year if prices continue their relentless rise."

The benchmark New York contract price for oil for January delivery rose by 51 cents to 88.88 dollars a barrel, in mid-day trading in London.

OPEC production rose slightly in November by 45,000 bd to 29.2 mbd, the agency reported.

OPEC's spare capacity to produce oil was 5.6 mbd in November, and its overall production capacity was set to rise by 2.1 mbd to 36.9 mbd by 2015.

Growth of demand this year was driven largely by "buoyant gasoil (diesel) demand" amounting to an increase of 2.5 mbd but this increase should slow to 1.3 mbd next year "as temporarily supportive factors fade."

The IEA, a branch of the 33-member Organisation for Economic Cooperation and Development said that "cold winter weather hard on the heels of exceptional third quarter global demand growth pushed prices to two-year highs over 90 dollars per barrel by early December."

A "strong rebound" of growth of oil demand in the OECD area had matched almost exactly growth outside the OECD.

"Trend economic growth for 2010 onwards ... remains close to 4.5 per cent annually," it said referring to its baseline economic forecast assumptions based largely on estimates by the International Monetary Fund.

A second, lower baseline assumption constructed by the IEA of possibly 3.3 per cent growth also remained in line with the hypothesis in June.

"Medium-term oil product demand is now expected to be 1.1 mbd higher on average over 2009-2015" than projected in the IEA's medium-term outlook in June.

Overall "global oil demand is seen rising from 85.0 mbd in 2009 to 93.4 mbd in 2015, equivalent to plus 1.6 percent or plus 1.4 mbd per year on average." This was slightly higher than outlined in the June report, and the growth came almost entirely from non-OECD economies "which will account for more than half of global demand as early as 2013."

The agency said it had edged up its estimate of OECD oil demand this year and next by about 100,000 barrels per day and non-OECD demand by 90,000 bd.

Referring to immediate demand factors, the IEA said that "in terms of products, gasoil accounted for 42.0 percent of global third-quarter growth" rising almost twice as fast as in the same period of 2007 and 2008 "and is on track to rise by 4.1 percent in 2010."

On the supply side, the IEA said it had increased its June estimate of medium-term global production, saying it would now rise from 91.4 mbd in 2009 to 98.0 mbd by 2015, an increase of 1.5 mbd from the previous estimate owing mainly to "improved non-OPEC supply prospects."

It said: "Non-OPEC supply growth by 2015 is more than doubled compared to the June medium-term outlook, to 2.3 mbd, with total output seen rising from 51.7 mbd in 2009 to 54.0 mbd in 2015."

The agency said that despite continuing weak margins in the refining industry throughout 2010, new refining capacity was being built at a fast pace. Nearly 40 per cent of the increase to 2015 was expected to be built in China and 70 per cent overall in Asia and the Middle East.

AFP

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