For the first time in several months, the International Energy Agency Thursday slightly raised its 2008 world oil demand growth forecast but cautioned that global crude consumption will remain well-below trend into 2009 amid declining economic conditions.
Lower economic growth and high oil prices, which have traded over $100 a barrel for much of 2008, have steadily eroded crude consumption in developed markets like the U.S. and Europe, but healthy economic activity in emerging nations like Saudi Arabia and China has been making up the difference.
"In 2008 and 2009 global demand is significantly below trend ... but non-OCED consumption is still expected to remain exceptional," said Lawrence Eagles, editor of the IEA's monthly oil market report. He added that the long-term average over a number of decades for world oil demand growth is around 1.6% annually.
But growth rates of just 1% are expected globally this year and in 2009, the Paris-based agency, energy adviser to many of the world's wealthiest nations, said in its July report.
The agency revised up its 2008 world crude demand growth forecast by 90,000 barrels a day from June due to increased emerging market consumption. The upward revision was the first since December after which the agency slashed its forecast for many months.
The world is expected to use on average 87.7 million barrels a day in 2009, representing growth of 860,000 barrels a day from 2008. Much of that growth will come from non-Organization for Economic Cooperation and Development nations in Asia and the Middle East where crude consumption will rise at a rate of 3.8%.
By contrast, oil demand growth in the U.S. and other developed markets that comprise the biggest share of the total is seen easing for a fourth year in a row by 1.2% in 2009.
On the New York Mercantile Exchange, light sweet crude futures for August delivery traded at $136.59 a barrel at 0835 GMT, up 54 cents following the release of the IEA report.
The agency also said increased production in June from the Organization of Petroleum Exporting Countries, if sustained, would allow global oil stocks, a back-up supply, to build to more comfortable levels.
OPEC, whose crude meets about 40% of the world's daily oil demand, pumped 350,000 barrels a day more in June at 32.4 million barrels a day. Much of that growth came from Saudi Arabia which started boosting output in May to meet increased customer demand.
The IEA said non-OPEC producers like Kazakhstan and Brazil will add a modest 220,000 barrels a day in supply growth in 2009 from this year. Non-OPEC supplies will grow by a total of 640,000 barrels a day next year, which is better than the lackluster 400,000-500,000 average growth seen annually seen since 2005 that has fueled market concerns about inadequate oil supplies.
The agency also said the argument within OPEC and in some consuming nations that oil trader speculation has been a driver of record oil prices was dealt "another blow" following the recent release of U.S. oil trading data.
Peak oil prices coincided with the lowest open interest in West Texas Intermediate oil contrasts since March 2007, meaning that many dealers were lowering their bets on rising oil prices.Net positions of noncommercial dealers, such as hedge funds, were also falling at that time, the IEA said.