IEA nudges up 2009 oil demand, sees higher supply

LONDON - World oil demand will rise slightly more than expected in 2009, but supplies will also increase, the International Energy Agency said on Tuesday.

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Published: Tue 12 Aug 2008, 6:12 PM

Last updated: Sun 5 Apr 2015, 11:53 AM

Demand will rise by 930,000 barrels per day (bpd) in 2009, 60,000 bpd more than previously forecast, the IEA said in its Oil Market Report for August. It cited higher European demand for the revision.

Oil prices have fallen steeply from a record high of $147.27 a barrel on July 11 to about $113, pressured by evidence of slowing demand and economic growth in industrialised countries.

"The basic fundamentals look easier going forward, and we're pleased to see that," David Fyfe, an IEA analyst and acting head of its Oil Industry and Markets Division, told Reuters.

But the IEA, which advises 27 industrialised countries, said it was too early to say the market had reached a turning point given recent disruptions to supply from Nigeria and Azerbaijan.

Violence in Nigeria and the shutdown of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline following an explosion and fire has cut supply of high-quality crude oil by more than 1 million bpd in total.

In addition, the Russia-Georgia conflict highlighted the vulnerability of energy gas pipelines crossing Georgia. Russia said on Tuesday it had ordered a halt to its military operations in Georgia.

"Is this really the tipping point for the market that some pundits have identified? We would hesitate before automatically extrapolating the recent price trend," the IEA said.

Rising supply

China and the Middle East, where fuel subsidies are shielding consumers from high crude prices, remain the drivers of demand. High prices are curbing fuel use in Europe and the United States.

"We're still seeing fairly strong growth outside the OECD," Fyfe said. "But the underlying trends for the U.S. in particular remain weak."

The IEA nudged up its forecast for world demand in 2009 by 70,000 bpd to 87.8 million bpd and said the outlook for 2008 was virtually unchanged.

It also pointed to rising production that could indicate a more comfortable balance between demand and supply.

Output from the 13-member Organization of the Petroleum Exporting Countries (OPEC) rose by 145,000 bpd in July to 32.8 million bpd, as Saudi Arabia, Nigeria and Iran all produced more oil.

Supplies from Norway, Canada, Argentina and Brazil underpinned non-OPEC growth of 520,000 bpd. About three in every five barrels come from outside OPEC.

The IEA lifted forecasts for non-OPEC supply by 100,000 bpd in 2008 and 2009, citing higher projections for the North Sea and United States. That counters the view of other analysts, who have predicted non-OPEC supply growth will continue to disappoint.

In all, the IEA expects non-OPEC supply to reach 50.8 million bpd in 2009, up from 50.1 million bpd in 2008.

The world's reliance on OPEC to meet demand will not increase next year because of higher supply from non-member countries, according to the IEA. It lowered the need for OPEC crude by 100,000 bpd for 2008.

Rising OPEC supply has reduced the amount of effective unused capacity the group holds in reserve to meet jumps in demand or supply breaks to a slim 1.5 million bpd, the IEA said.

But spare capacity should rise at the end of this year and into 2009, it forecasts.

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