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Global tension, Chinese demand to keep oil markets on edge: IEA
AFP
PARIS
Petroleumworld.com 10 12 06
The IEA shaved Wednesday its forecast for growth of global oil demand this year and next, as OPEC signalled that its members would cut production to bolster prices.
The International Energy Agency said in its monthly report that a possible OPEC output cut, global instability and growth in China were likely to keep the market under tension, even though prices had fallen because of stockbuilding and slowing demand.
The agency forecast an increase of 1.2 percent in global oil demand this year to 84.6 million barrels per day and a 1.7-percent rise in 2007 to 86.0 million barrels per day.
This was lower than its previous growth estimate of 1.3 percent in 2006 and 1.8 percent in 2007.
High crude prices, relatively mild weather and competition from natural gas were factors in a fall of 0.2 percent in demand this year for oil products among member countries of the Organization for Economic Cooperation and Development (OECD).
But demand in industrialised countries was expected to rise modestly by 0.5 percent in 2007, the IEA said in its latest Oil Market Report.
Overall, the report painted a picture of strong global growth and a boom in China, but qualified this with a warning that some signs pointed to possible further slowing in the United States.
It also observed that most demand growth would come from emerging economies but that "in the OECD, by contrast, the trend over the past few years has been little or no growth in oil product demand as a whole".
However, "non-OECD growth is still robust, driven by China and the Middle East".
So, although crude prices have fallen by about 18 dollars a barrel from a high point of more than 78 dollars in early August, "they remain historically high in both nominal and real terms".
Chinese economic growth is expected to average 9.5 percent over the period from 2007-2011, according to the IMF, suggesting several more years of strong energy demand from Asia.
"Improved prospects in France, Japan and Russia will also contribute to offset slower US growth," the report said.
Meanwhile, the Organization of Petroleum Exporting Countries is now mulling a production decrease of one million bpd, which the IEA said "would raise effective spare capacity from its currently low 1.9 million bpd".
That could in fact ease some speculative pressure on markets that is believed responsible in part for high prices, however.
In addition, oil supplies had increased and heading into the northern hemisphere's winter, the picture "appears better than it has for several years".
"Overall, OECD commercial petroleum stocks have built in recent months to around 55 days of foward supply", the report said.
But it warned that "geopolitics, tight upstream capacity and cold weather demand have the potential to inflict more price volatility on a finely balanced market this winter."
The report was published just days after North Korea was suspected of having tested a nuclear weapon, raising again the issue of nuclear development and possible sanctions against Iran, which holds the world's second biggest proven reserves of crude oil.
In September, crude oil supply from OPEC countries fell by 155,000 barrels per day (bpd) to 29.8 million, with Saudi Arabia, Iran and Nigeria cutting output.
But "with or without rumoured OPEC output cuts, the short-term price risks seem skewed to the upside," the IEA said.
The agency pointed out that while consumption by developed countries that belong to the OECD account for nearly 60 percent of overall oil demand, "over 80 percent of global demand growth is attributable to non-OECD countries" according to 2005 figures.
"This relects ongoing structural changes in the world economy, since several non-OECD nations will be among the largest economies in the medium term."
AFP 11 1028 GMT 10 06
Copyright ©2006 AFP. All Rights Reserved.
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