Oil steady above $74 on strong demand outlook

LONDON - Oil stood firm at above $74 a barrel on Wednesday as the West’s energy watchdog forecast accelerating oil demand growth in 2007 and beyond.

By (Reuters)

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Published: Wed 12 Jul 2006, 7:30 PM

Last updated: Sat 4 Apr 2015, 3:09 PM

Prices were supported by expectations that US inventory data later in the day would show robust gasoline demand and by Iran’s defiant stance to Western demands for limits on its nuclear ambitions.

US crude futures CLc1 climbed 20 cents to $74.36 a barrel by 1042 GMT. London Brent LCOc1 added 19 cents to $73.86 a barrel.

High prices have stemmed the world’s voracious appetite for oil a little, but growth in demand is expected to rise more quickly through 2011 than it did in the past decade, the Paris-based International Energy Agency said.

“You are still seeing high prices restrain demand,” said Lawrence Eagles, head of the IEA’s Oil Industry and Markets division.

“But there are a number of large developing countries such as China that have reached a threshold of income in which oil demand starts to take off.”

The IEA, adviser to 26 industrialised countries, predicted the world would need 1.57 million barrels per day more oil to fuel economic growth in 2007, up from annual growth of 1.21 million bpd this year.

But the strain on members of the Organisation of Petroleum Exporting Countries (OPEC) to meet demand growth should ease next year as rival producers start new oil projects, the IEA said.

Suppliers outside OPEC should more than meet the 2007 demand growth, the IEA said. But non-OPEC output has typically lagged expectations and the IEA said there was risk to the downside in its supply forecast.

OPEC produces about a third of the world’s oil, and saw its spare capacity almost wiped out as it’s struggled to meet strong demand growth in 2004 and 2005.

Traders were looking for signs, in US inventory statistics due out later on Wednesday, that short-term demand would be as resilient as the long term.

The data covers gasoline demand in the world’s largest energy consumer over the four-day July 4 holiday. The weekend is the biggest vacation travel weekend of the summer driving seasn, when gasoline demand peaks.

US gasoline stocks were expected to fall 100,000 barrels per day, a Reuters poll of analysts showed [EIA/S].

Last week, data showed US gasoline demand was up 1.4 percent from the same time last year. The US consumes over 40 percent of the world’s gasoline, so even a small rise in demand can push oil prices higher.

Resilient US gasoline demand helped push US crude futures to a record front-month contract high last week at $75.78 a barrel.

“The market is looking tighter, the data flow is supportive,” said Kevin Norrish of Barclays Capital.

“Fundamentals suggest prices are well supported at these sorts of levels, irrespective of geopolitics.”

Iran resistance

Prices rallied on Tuesday after Iran defied calls for an early response to incentives offered by major powers for it to stop enriching uranium.

Iran has said it will respond to the incentives in late August. The United States, which has accused Teheran of working to build nuclear weapons, has said it wants a clear response before the Groupof Eight meets this weekend.

The row has been a key concern in the oil market this year, contributing to a near 22 percent rally.



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