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IEA renews call for OPEC to raise oil output

Gasoline supplies in top consumer the United States have sunk to a 16-year low for the time of year, pushing pump prices above $3 a gallon to near record levels, the adviser to 26 industrialised nations said in its monthly Oil Market Report.

The May report marked the third month running the Paris-based agency has urged the Organization of the Petroleum Exporting Countries (OPEC) to open the taps to lower prices and refill inventories.

“We see a big, 1.6 million barrel a day crank up in global demand in June and there are still constraints in the refining side,” said Lawrence Eagles, head of the IEA’s Oil Industry and Markets Division.

“We need to start getting the crude in place now to avoid a stock draw.”

Fuel inventories in the industrialised countries, which are members of the Organisation for Economic Co-operation and Development (OECD), have already have been drained by an ”unusually high” 900,000 barrels per day (bpd) during the past six months, it said.

This coincides with OPEC supply cuts totalling 1.7 million barrels per day (bpd).

“I agree with the IEA’s message,” said Mike Wittner of Calyon investment bank. “When you look at the balances, OPEC will have to increase in a big way as we approach the second half of the year.”

Gasoline tight, Nigeria outages

Gasoline inventories are lean, especially in the United States, which consumes 40 percent of the world’s motor fuel.

“The area of indisputable tightness is the gasoline market,” said Eagles.

Deepening supply outages from Nigeria, the world’s eighth-biggest crude exporter, have aggravated the situation. Militant attacks have shut a quarter of the OPEC member’s crude output, valued by refiners for its rich gasoline content.

The IEA estimated total Nigerian outages had risen to 815,000 barrels per day (bpd) in early May.

The prolonged Nigerian outage, OPEC’s supply curbs and strong demand for gasoline have combined to push oil above $66 a barrel, well above the $50 at which it traded in January.

While noting the constraints on gasoline, OPEC ministers continue to dismiss calls to pump more crude. They insist they are supplying enough to satisfy the 85.5 million bpd oil market.

The group that pumps more than a third of the world’s oil decided to maintain current supplies at a meeting in March and is to meet next in September to chart production policy.

But the IEA says OPEC must act before then. Demand for the 12 members’ crude will rise by up to 400,000 bpd in the third quarter alone because of slower output from rival producers, it said.

Production from OPEC stabilised at 30.3 million bpd in April, according to the IEA, leaving 2.8 million bpd of spare capacity. The group’s sustainable capacity is expected to rise to 34.8 million bpd by the fourth quarter from 34.1 million.

The agency lowered its non-OPEC oil supply growth forecast for 2007 by 100,000 bpd to 1 million bpd.

It left its 2007 oil demand growth forecast unchanged at 1.8 percent, or 1.5 million bpd.