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Oil market rests on fragile supply cushion: IEA
AFP
PARIS
Petroleumworld.com 08 10 06Estimated world oil product demand is flat at 84.8 million barrels per day this year and the market has a fragile cushion to absorb supply disruptions in Alaska and elsewhere, the IEA reported on Friday.
"For the time being, the market can cope with current outages," the International Energy Agency said in its monthly review of the oil market.
"But in the light of the many possible threats to output, including the current hurricane season, there is little doubt that the upstream spare capacity cushion remains thin."
The impact of disruption to supplies from the BP field in Prudhoe Bay, Alaska, would probably be substantially less than the 400,000 barrels per day reported because of offsetting factors elsewhere.
The agency said that Chinese demand might grow faster than expected and it raised its forecast of oil product demand from China this year by 24,000 barrels per day to 7.1 million bpd, an increase of 6.5 percent from the 2005 figure.
And it raised its estimate for 2007 by 21,000 bpd to 7.4 million bpd, an annual increase of 5.5 percent.
World oil supplies had increased by 615,000 barrels per day in July to 85.5 million barrels.
"Revisions driven by an unscheduled shutdown of Alaska's 400,000 barrels per day Prudhoe Bay field trim non-OPEC supply by 220,000 barrels per day in 2006 and 30,000 bpd in 2007."
The report put non-OPEC output at 51.1 million bpd on average in 2006 and 53.0 million bpd in 2007.
In July, supplies of oil from the Organization of Petroleum Exporting Countries fell by 225,000 bpd to 29.8 million bpd because of disruption in Iraq and Nigeria, and maintenance of facilities in Venezuela.
"Effective (OPEC) spare capacity, currently 2.0 million bpd, could stay tight in the coming months if Nigerian and non-OPEC outages persist and OPEC raises output to compensate."
However, overall estimated oil product demand this year remained unchanged at 84.8 million bpd, the IEA said.
Strong demand from China in the second quarter had been offset by downward adjustments to US data and "relative weakness in Europe and Japan".
OECD industrial oil stocks were flat at 2,664 million barrels and this represented 54 days of consumption as in July and compared with 53 days in August of last year.
The report said that disruptions to supplies, threat of hurricane damage, turmoil in the Middle East and concern over Iran's nuclear policy presented a tight picture for the oil market.
But "scratch below the surface...and these geopolitical and supply issues are less defining for the oil market than they appear."
Oil prices had spiked on fighting in Lebanon, but then eased when a political solution seemed possible.
Concern of possible disruptions to supplies was rising as a deadline of August 31 approached for Iran to accept United Nations Security Council admonishments over its nuclear activities. "For the moment this is a psychological rather than a physical issue."
In Nigeria, about 750,000 bpd were "offline" but new offshore capacity was due onstream at the end of the year.
IEA estimates had already factored in some reduction of output from the Prudhoe Bay field.
"While Prudhoe Bay represents a significant outage, there are potential offsets, from Saudi Arabia, the US strategic petroleum reserves and above-trend refiner stocks."
The IEA said that after allowance for all such factors on its calculations "the call on OPEC through to the end of the year remains below OPEC's average output for the last three months."
AFP 11 0810 GMT 08 06
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