IEA: Oil supply, demand adjusting to high prices

Bob Tippee

The most difficult prediction to make about the oil market is the reversal of current trends. Most faulty forecasts trip over the temptation to believe current trends endure forever.

Like all their predecessors, recent market trends—prices increasing as demand pushes against supply limits resistant to growth—won't last.

The International Energy Agency's Oil Market Report for July hints strongly that change, however gradual, is under way.

Oil inventories in industrial countries have returned to normal from precariously low levels of 2003-04. The market no longer consumes every barrel of oil as soon as it's produced.

The largely price-induced changes in supply and demand that have brought this about are increasingly evident in IEA's numbers.

For global average oil demand in 2005, the agency has trimmed its projection by 410,000 b/d to 83.8 million b/d. Part of the adjustment is to baseline demand. The overall cut in projected demand growth is 200,000 b/d�to 1.58 million b/d.

Notwithstanding the baseline change, IEA says, "The outlook for both Chinese and US demand growth is weaker."

The projection for demand growth next year: 1.75 million b/d. After surging by 3.5% in 2004, therefore, global average oil demand in IEA's view is returning to growth of 2%/year, normal for recent years.

The agency also reports signs of a supply-side response to elevated oil prices, noting "a marked uptick" in upstream activity. IEA says projects under development will add 1-1.5 million b/d/year to supply from countries outside the Organization of Petroleum Exporting Countries through 2009.

Much of the increment will be from projects planned before the price surge of the past 2 years. But IEA notes that high prices have accelerated some projects.

The agency projects increases in total non-OPEC supply to 51 million b/d this year and 52.4 million b/d in 2006 from 50.1 million b/d in 2004.

"The unfolding statistical picture increasingly reveals that fear of the unknown and the consequent desire to make forward purchases is behind oil's higher price path," IEA says.

As confidence grows in the inevitable market adjustment, that will change, too.

(Online July 15, 2005; author's e-mail:

Related Articles

Rig counts are up where plans focus on the long term


Rig counts plummet except where they don’t.

OPEC supply surge swamps downturn in US tight-oil output

07/10/2015 Confession: Early this year, your correspondent predicted that oil production from shales and other low-permeability formations would be declining ...

Twist of activists’ dogma freshens view of global warming


Fresh perspective on global warming, a topic that needs it, comes from a geologist.

Emerging producers offered guidelines for governance

06/26/2015 Like most worthy endeavors, governing oil and gas activity at the national level is easier said than done—especially where oil and gas never before...

New king reshaping Saudi oil industry; extent still unclear


A new ruler is making important changes in the state-run petroleum industry of the world’s most influential oil-producing nation.

Energy prominent among US rules due in next 12 months


Energy figures prominently in a regulatory blitz taking shape as the Obama administration approaches its end.

Political, technical problems seen for energy-subsidy reform


Fossil-energy subsidies receive more talk than action, too much of it politically opportunistic.

Oil-demand curve’s flattening adds to pressure on OPEC

06/01/2015 When leaders of the Organization of Petroleum Exporting Countries meet in Vienna on June 5, they should heed a stern signal from the oil market.

Coast Guard cadets summoned to battle climatological foe

05/22/2015 Confusion evident in President Barack Obama’s commencement address at the Coast Guard Academy raises a question bearing on American foreign policy:...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts

Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected