PARIS: Demand for oil this year will be slightly higher than expected, the IEA forecast yesterday, highlighting signs of tension in the market and urging Opec to raise output.
Oil prices are expected to remain high, and the IEA said that Opec should raise production sharply to keep world oil markets well-supplied in the face of what would be record global demand.
But strong demand in the first quarter is predicted to slow down for the rest of the year because a weaker outlook for global economic growth would weigh on consumption.
Opec production had fallen to a five-month low point in March but surged by 405,000 barrels per day (b/d) in April to 29.90m b/d, the agency said, close to the Opec ceiling. The IEA expects Opec ministers to maintain the production ceiling of the world’s top oil producing group at 30m b/d in Vienna meeting on June 11, noting that Saudi Arabian Oil Minister Ali bin Ibrahim Al Nuaimi had said that “supply is sufficient” and there was “absolutely no reason” to raise the limit.
The International Energy Agency raised its forecast for global demand by 65,000 b/d to 92.8m barrels, largely because of unexpectedly strong demand in the first quarter, driven by consumption in the US economy.
Demand for oil from countries outside the advanced democracies covered by the Organisation for Economic Cooperation and Development — mainly emerging economies — also rallied strongly in the first quarter.
The IEA, the energy monitoring and policy arm of the OECD, said this was driven notably by growing demand in India, China, Brazil, Iran and Saudi Arabia.
The agency said that despite easing of demand in April, normal for the time of year, “crude prices remain elevated” and signs indicated there should be a “significant rise in Opec production from current levels in the second half of the year”.
While the Organisation of Petroleum Exporting Countries “has more than enough capacity” to raise output, the IEA said it was not clear that Opec would be able to overcome problems that “have plagued some of its member countries recently”.
Unrest in Libya, for example, meant that it was unclear whether the country “can keep its ports open and unlock its exports,” the IEA said. On the supply side, the monthly IEA report said that in April global supplies rose by 700,000 b/d from the March level to 92.1m b/d, with more than half of the increase coming from Opec countries.
The agency also pointed to evidence that the world’s second-largest economy China may have begun pumping oil into a recently completed expansion of its strategic reserve facilities.
“While that would benefit energy security not just in China but globally, crude exports of that scale might also support oil markets,” the IEA said.
But it warned: “While Opec production gains of around 400,000 b/d went some ways towards easing markets last month, that gain will be insufficient to meet market needs in the second half of the year, when consumption bounces back seasonally.” This meant that “in order to balance forecast demand, Opec countries would need to hike third-quarter production by another 900,000 barrels per day from April levels”.
The IEA said customs data suggested that China had increased its oil imports sharply to a record high of 6.81m b/d in April. Oil tanker tracking data also pointed to a big increase in imports from Russia, Oman, Angola and Iraq, and that supplies from these sources had risen to more than 700,000 b/d, another record.
“China’s imports from Iran also jumped to over 600,000 barrels per day, based on preliminary data, the highest since June 2012.”
However, the agency warned that in the long term, “relatively challenging economic conditions continue to dampen expectations of Chinese oil demand for 2014”.
Demand in the first quarter of this year had outstripped the previous forecast by 190,000 b/d to 91.3 mbd, mainly because of unexpectedly strong demand in the United States, Japan, Germany and Britain. AFP
