IEA lifts oil demand forecast but warns on economy

Global oil demand growth will inch higher
over the rest of this year and into 2011, but any rise will be wiped out
if the economy is weaker than forecast, the International Energy Agency
(IEA) said on Wednesday. The
increases were slight, and the IEA said in its monthly report that they
could disappear altogether if the economy falters.
"We are flagging that the signals that are coming out are pretty
mixed," said David Fyfe, head of the IEA's oil industry and markets
division. "We could lose all that (demand) growth in 2011 if GDP growth comes in about 30 percent lower than the consensus forecasts." U.S. crude oil prices extended losses following the report and were down 81 cents at $79.44 a barrel at 1037 GMT.
"The report concurs with our view that global demand growth is
slowing in the key economies, and that doesn't bode well. So the
recovery is stalling, but it's unlikely that we will get a double-dip
recession," said energy strategist Sabine Schels at Bank of America
Merrill Lynch. The IEA said
global oil demand would rise by 1.8 million bpd (mbpd) year-on-year to
86.6 mbpd in 2010, which was 80,000 bpd higher than the forecast in the
July report from the IEA, which advises 28 industrialised countries.
For 2011, it forecast consumption would rise to 87.9 million bpd, up
1.3 million bpd year-on-year and a 50,000 bpd rise from last month's
forecast, taking account of baseline adjustments.
Overall, the IEA still expects a slowdown in the pace of growth from
this year to next on early signs of flatter fuel consumption in the
United States and China. The
IEA August demand forecast is higher than other major estimates, even
after the U.S. Energy Information Administration revised its figure up
on Tuesday to 85.91 mbpd for 2010.
The Organization of the Petroleum Exporting Countries (OPEC) is
expected to release its monthly report on supply and demand on Friday. Reuters Insider interview with IEA's David Fyfe, click link.reuters.com/cam34n SUPPLY PRESSURE Adding to the bearish elements for the oil price, IEA revised its supply forecasts upwards by more than the hike in demand.
The organisation predicted non-OPEC supply would grow by 200,000 bpd
in 2010 to 52.6 mbpd and by 100,000 in 2011 to 52.9 mbpd compared with
the previous month's report following an upwards U.S. baseline
adjustment and higher Chinese output in the second quarter.
Its figures for outright non-OPEC supply growth were 850,000 bpd for
2010 and 340,000 bpd for 2011 as additional supplies come on stream in
the countries of the former Soviet Union and in Latin America.
The upward trend in non-OPEC supply may be partially offset by
regional project delays following BP's oil spill in the U.S. Gulf of
Mexico, IEA said. The IEA raised estimates for lost output to 60,000 bpd in 2010 and 100,000 bpd in 2011 as a result of the leak.
Oil stocks held in countries within the Organisation for Economic
Co-operation and Development amounted to a comfortable 61 days of
forward cover in late June and were barely changed from May, the IEA
said. The amount of crude oil
in floating storage fell to 59 million barrels at the end of July from
85 million in June, the IEA said. But oil products stored at sea rose by 4 million barrels to 34 million over the same period.Courtesy: Reuters