The International Energy Agency raised its global oil demand estimate for next year for a second consecutive month, citing growth in Chinese consumption and stronger-than-expected oil use in the U.S.
World oil consumption is likely to average 85.7 million barrels a day next year, 450,000 barrels a day more than previously estimated, the adviser to 28 nations said today in its monthly report. Demand growth next year, at 1.27 percent, is lower than previously forecast after the outlook for 2009 was also increased.
“There is growing evidence that the global economy may be finally stabilizing, with industrial de-stocking coming to an end, coupled with the effects of large-scale government intervention,” the IEA said in the report. “Oil demand in U.S., China and other Asia appears to be running stronger than preliminary estimates suggested.”
Oil futures in New York have advanced 62 percent this year and traded today above $72 a barrel, as global stock markets rallied on growing optimism about the world’s economic recovery. The surge prompted ministers from the Organization of Petroleum Exporting Countries to maintain production quotas at a meeting in Vienna that ended early today, the third time in 2009 the group has met without changing output.
Demand growth is led by China, which is “seemingly roaring ahead,” thanks to government economic stimuli measures and stock building, according to the report.
North America Consumption
The group also raised its forecast for North America this year and next by about 180,000 barrels a day, after data for gasoline and heating oil consumption in June showed a “hefty” increase. Demand in the region is now forecast to shrink 4.4 percent this year, compared with last month’s forecast 5.1 percent, and increase 0.8 percent in 2010.
Still, there remains “considerable uncertainty regarding the prospects of a sustained U.S. economic recovery,” the IEA said. Consumption in the world’s developed economies is likely to remain weak for the rest of this year while declining demand for middle distillates casts some doubt on the strength of the industrial recovery, the group said.
“The spectre of a double-dip, W-shaped recession, which would undermine oil demand growth next year, cannot be entirely discounted,” the adviser said. “The persistent weakness of heating oil and diesel calls into question the depth and durability of fledgling industrial recovery.”
Global Demand Shrinking
Global oil demand will shrink this year by 2.2 percent to 84.4 million barrels a day, even with an upward revision of 490,000 barrels a day from last month’s report, the IEA said.
As OPEC urges members to adhere more closely to output cuts of 4.2 million barrels a day agreed through last year, the IEA estimates that the group’s compliance with its quotas slipped last month as Nigeria, Venezuela and Angola overproduced.
Supplies from the 11 OPEC nations subject to quotas, from which Iraq is exempt, rose by 80,000 barrels a day in August, to 26.25 million barrels a day. That is about 1.4 million barrels a day more than the 24.845 million barrels a day target, signifying compliance of about 66 percent, the IEA said. The members complied with 68 percent of the cuts in July, according to the agency’s estimates.
“Iran, Angola and Venezuela look to have turned a blind eye to their output targets, which collectively account for just over 65 percent of overproduction since January,” according to the report.
As the IEA left its estimates for non-OPEC production unchanged for 2009 and 2010, higher global demand forecasts mean the world will require more crude from the producer group. The agency raised its “call on OPEC crude” by 500,000 barrels a day for 2009 and by 400,000 barrels for next year.
(Bloomberg, 09/10/2009)