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IEA raises oil demand forecast for 2007, warns on OPEC cuts
By Rory Mulholland
AFP
PARIS
Petroleumworld.com 02 14 06The International Energy Agency raised its 2007 world oil demand estimates on Tuesday, citing a major revision to estimates of China's needs, and warned OPEC that production cuts might seriously tighten the market.
Oil consumption has dropped in industrialised countries for the first time for two decades but was rising strongly in emerging economies, the influential energy watchdog said in its monthly oil market report.
Demand in countries outside the OECD industrialised nations would be 3.2 percent this year, the IEA said.
On oil supply, the report said that an output cut already decided by the Organization of Petroleum Exporting Countries, whose members produce about 40 percent of the world's oil, "may be unnecessary."
It warned that a production cut already programmed by OPEC, if applied, would bring its output down to 25.8 million bpd from this month, a level that could see demand for OPEC crude outstripping supply from OPEC countries by the second quarter.
It revised upwards its prediction for demand for OPEC oil in 2007 to 30.6 million bpd and warned that "additional OPEC-10 (the 10 members of the 12-member cartel bound by quotas) supply cuts could markedly tighten the market."
Saudi Arabia's oil minister said in comments published on Monday that OPEC might not have to cut output further at its meeting next month.
The IEA said: "Global oil product demand is raised by 111,000 barrels per day (bpd) in 2006 to 84.5 million bpd and by 273,000 bpd in 2007 to 86.0 million bpd following revisions to China."
But for the first time since 1985, oil demand in the 30 industrialised countries of the Organisation for Economic Cooperation and Development had shown a significant drop, the report said.
This was probably a reaction to high prices, but the drop did not imply a change in the longer-term trend.
The Paris-based IEA, which represents the interests of consumer countries, said however that "in non-OECD (demand) has been robust" and that "non-OECD oil product consumption is forecast to grow by 3.6 percent and 3.2 percent in 2006 and 2007, respectively."
That was in large part due to "Chinese apparent demand, which is now seen to reach 7.1 million barrels per day in 2006 and 7.6 million barrels per day in 2007."
The agency reduced its estimate of oil product demand in OECD countries by 97,000 bpd in 2006, as a result of large revisions, notably to US data, and continuing mild temperatures throughout December that curbed heating and residual oil demand.
On the supply front, the report said that "world oil supply grew by 175,000 bpd in January to 85.5 million bpd, with higher output in the FSU (former Soviet Union) and other non-OECD producers."
But in January crude supply from OPEC fell by 180,000 bpd from December to 30.2 million bpd.
Demand for OPEC oil "is revised up to 30.6 million bpd for 2007 versus 30.3 million bpd in 2006 and remains above existing OPEC production," said the IEA's 52-page report.
An oil analyst at the IEA, Lawrence Eagles, said after publication of the report: "The shift towards alternative energies will take place only in 2010 and beyond.
"In the meantime it is likely the world will have a rebound in growth demand driven by non-OECD countries," he told AFP.
The monthly report also noted that high oil prices have caused a decline in demand for domestic heating oil and fuel oil.
The price per barrel of crude oil hovered around the 58 dollar mark on Tuesday, but in mid-2006 had reached record highs of above 78 dollars.
"China has been aggressively switching to non-oil power generation capacity, while the US and Europe have continued the shift towards natural gas, and to some extent coal," said the report.
Demand for petrol (gasoline) has also declined across the OECD countries as a whole in the past two years, with transportation fuel demand growth falling to 1.3 percent from 1.8 percent between 1996 and 2004.
"In Japan, there has been a clear switch towards smaller, more efficient vehicles and while it may be some time before the average US commuter drives around in a 'super-mini, a shift away from some of the light truck-based SUVs (sports utility vehicles) has been seen."
The report also noted that many analysts were now wondering whether China would cease to be a gasoline exporter in the medium-term.
It said Chinas net exports of gasoline shrank by almost 39 percent in 2006 to 80,000 bpd, and that the country was no longer Asias largest gasoline exporter, having already been overtaken by Taiwan.
Chinas voracious appetite for gasoline is the main cause of this, it said. Vehicle sales rose by 25 percent to a record of 7.2 million units in 2006.
But refining decisions have also played an important role, as Chinese refiners maximize or minimize the production of certain products depending on demand, prices and government pressures, said the IEA.
AFP 13 1225 GMT 02 07
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