World oil supply rose by 300,000 barrels per day in August to 83.6 million barrels per day, owing mainly to a rise of 410,000 barrels a day by members of the Organisation of Petroleum Exporting Countries, the IEA estimated.
World demand this year would total 82.16 million barrels per day. This represented an increase of 2.52 million barrels per day from the 2003 figure and was expected to rise again by 1.77 million barrels per day next year.
Noting that the price of oil had fallen by more than eight dollars a barrel in six trading days at the end of August, and then rebounded by two dollars in two days, the IEA commented that ”short-term phenomena are driving the market as fundamentals do not change that quickly”.
The report was published shortly after Opec president Purnomo Yusgiantoro had said in Jakarta that world oil prices would soon fall because “over supply will stand at 2.7 million barrels per day”.
The International Energy Agency said that it disagreed with one view held by some analysts that lack of investment and structural changes in demand by emerging economies, notably “surging Chinese demand”, had stretched the market.
This view held that the market was like a “taut piano wire” putting the oil price on a base line of 40 dollars a barrel or more, and that as demand for oil products rose with the approach of winter in the northern hemisphere “the market can only get tighter”.
The IEA said it took the counter view “that today’s market is well supplied with crude”.
It said: “While demand is rising, so too is global supply ... Geopolitical risks remain real but they are no greater today than they were in the past. And despite the ongoing rehetoric over (Russian oil company) Yukos, Russian production keeps rising month after month.”
The Russian government had “been at pains” to say that Russian oil exports would not be affected, and this raised the liklihood that it might intervene “to ensure Russia’s reputation as a reliable source of supply”.
Meawnhile the Yukos case did not appear to be underming the interest of foreign companies in Russian oil.
The IEA commented bluntly: “Suggestions of sustained 40-dollars-plus prices assume that supply and demand do not respond to price, that technology has run its course, that governments are helpless in pursuing energy policies, that recessions are a thing of the past and that Chinese oil demand will grow unchecked forever. Perhaps, but we have our doubts.
“What is clear for now is that supply is running ahead of demand and stocks are building.”
Opec produced 29.3 million barrels a day of oil in August. Saudi Arabia increased its production by 300,000 barrels per day to 9.5 million barrels but supplies by Iraq fell by 100,000 barrels a day to 1.8 million barrels.
Set against this total of supply by Opec, the IEA estimated in its monthly review of the world oil market that the demand for oil from Opec production and stocks will be 27.6 million barrels per day this year and next.
Although non-Opec supply fell by 150,000 barrels per day in August, it was expected to grow by 1.28 million barrels per day in 2004 and by 1.25 million barrels per day in 2005.
Production in Russia, where attention has been focused on the likely break-up of Yukos owing to tax demands, rose by 45,000 barrels per day in August from the July figure and 675,000 barrels more than production in July last year, to 9.35 million barrels per day.
Meanwhile total stocks of oil held by industry in the industrialised countries as represented by the Organisation for Economic Cooperation and Development rose by 18 million barrels per day in July and now represented 53 days of consumption, the same as an upwardly revised figure for June.
“OECD industry crude stocks are mid-range, with US gasoline stocks trending above their normal level,” the IEA reported.
It commented at some length however on the perspective of increased Opec, and notably Saudi Arabian, production - one of the main factors which drove prices to record highs in August because of uncertainty over Opec members’ capacity to increase production, and if so by how much.
In the 10 Opec countries, excluding Iraq, “spare production capacity continues to erode to very low levels, at least when measured on a sustainable basis,” the IEA said.
“However, a combination of surge capacity and expected capacity additions by year-end mean that short-term flexibility may be 1.9 million barrels per day more than suggested purely in terms of sustainable capacity.”
It added: “Opec sustainable capacity has changed only modestly from last month and averages 30.3 million barrels per day ... Opec-10 spare capacity has receded to 300,000 barrels per day.” But this excluded “extra capacity likely to be available in the short term on a surge basis which may amount to a further 1.85 million barrels per day.”
But this could probably not be sustained for more than three months.
“Key in this regard is Saudi Arabia’s reported capability to reach 10.5 million barrels per day compared to this report’s assesment of 9.5 million barrels per day sustainable capacity.”
Undercover journalist wrote how young villagers from Myanmar were being flown to Delhi and enticed to sell their kidneys
Renowned artist Refik Anadol's creation draws inspiration from a vast dataset of over 400 million publicly available nature-related images encompassing water, coral, and flora
Country's PMI reaches 57 in November
Milano Danube's water heaters take center stage with a five-star energy rating, competitive pricing, and a seven-year replacement guarantee
The project also features, at a height of 263 metres, the highest solar energy tower on the planet
The official reception ceremonies include a 21-gun artillery salute in honour of the visit and a flypast by the UAE Air Force aerobatics team Al Fursan