Marilyn Radler
Economics Editor
HOUSTON, Nov. 20 -- Acceleration in global economic growth has prompted the International Energy Agency to revise upwards its monthly assessment of oil demand growth.
In its most recent report, the Paris-based agency cited robust third quarter GDP in the US, faster than expected expansion of the Japanese and European economies, and Chinese GDP growth as the drivers of this change. IEA expects that China will contribute nearly 35% of global demand growth this year and 30% next year.
Worldwide oil demand is now estimated to increase 1.3 million b/d this year, up 170,000 b/d from the prior estimate. IEA forecasts 2004 demand growth of 1.1 million b/d, an upward adjustment of 20,000 b/d. Next year's slowdown in growth is attributed to the loss of one-time factors that supported this year's expansion, including high natural gas prices, nuclear issues, and colder-than-normal weather.
OECD demand
IEA cut its 2004 demand forecast in member countries of the Organization for Economic Cooperation and Development, where oil demand growth remains weak. OECD oil demand is forecast to rise 617,000 b/d this year and 247,000 b/d next year, a reduction of 80,000 b/d from the previous Oil Market Report.
This year's growth rate is better than last year's contraction of 77,000 b/d, IEA said, but it falls short of the previous 5-year average growth rate for 1995-99. Further, the agency explained that despite the recent surge of economic activity, 2004 oil demand growth reflects a shallower industrial recovery, more comfortable gas inventories, and an extrapolation of recent growth patterns.
Current projections call for North American demand to increase 300,000 b/d next year, roughly in line with 2003, as accelerating economic growth replaces weather and other one-off factors as the growth drivers there.
Supply
The call on crude from the Organization of Petroleum Exporting Countries plus stock change figure has moved up 600,000 b/d for the second half of this year because of upward adjustments to non-OECD demand and downward revisions to OECD supply.
October non-OPEC crude supply recovered from suppressed September levels. IEA reported that UK and Norwegian production last month partially rebounded following extended disruptions, while Russian production continued to rise sharply in spite of curtailed exports. The agency noted additional supply came from new fields in Africa and increased Gulf of Mexico and natural gas liquids output in the US.
OPEC crude production averaged 27.2 million b/d, according to IEA estimates. Production in Iraq is estimated at 1.6 million b/d, with 1.3 million b/d derived from the southern part of the country.
Excluding Iraq, the OPEC-10 averaged 25.6 million b/d last month, "within 200,000 b/d of the prevailing target level but over 1 million b/d above November's new target. Venezuela and Indonesia are producing around 20% below November target levels, but Algeria and, to a lesser extent, Qatar and Kuwait appear to be substantially over target in percentage terms," the agency said.
For this quarter, the call on OPEC crude plus stock change is 26.6 million b/d. Demand revisions centered on China have raised next year's call 200,000 b/d from IEA's previous report. However, the call still falls on average 800,000 b/d in 2004, with a low of 23.4 million b/d in the second quarter.
Contact Marilyn Radler at [email protected].
