IEA Raises 2010 Oil Demand Estimate

IEA Raises 2010 Oil Demand Estimate on Chinese, Saudi Growth 

 The International Energy Agency increased its forecast for 2010 global oil demand as the pace of economic recovery in Asia and the Middle East picks up. Global oil consumption is likely to average 86.2 million barrels a day next year, 140,000 barrels more than previously estimated, the adviser to 28 nations said today in its monthly report.

 The IEA also raised its estimate for consumption this year to 84.9 million barrels a day, up 220,000 barrels from last month’s estimate. Oil has climbed 78 percent this year as emerging markets lead the world out of recession, boosting global fuel use. The IEA expects demand in the fourth quarter of 2009 to rise on a year-on-year basis for the first time since the second quarter of 2008.

Still, rising prices threaten to slow the rebound in consumption, it said. “Surging demand in China and Saudi Arabia, as well as somewhat higher than anticipated data for the U.S.” led to the increase in estimates, the Paris-based agency said.

 “The pace of demand contraction is easing in the Organization of Economic Cooperation and Development, while demand in non-OECD countries is exceeding expectations.” The IEA expects 2010 consumption to increase by 1.6 percent, or 1.35 million barrels a day, driven by a 3.6 percent increase in demand from developing economies.

 That growth is 70,000 barrels a day slower than it forecast last month because of higher demand this year. The agency forecasts a contraction of 1.7 percent this year. Last month, it forecast a decline of 1.9 percent for 2009. China Consumption Demand growth is driven by China’s consumption of “other products” such as bitumen, lubricants and coke, and crude oil burning in Saudi Arabia for power generation, the IEA said.

 Stronger-than-expected diesel and gasoline consumption in the U.S in August also contributed to higher estimates, it said. “The recent price spike, if further extended, risks derailing the recovery,” the agency said. “Oil demand itself would rebound much more slowly were the price rally sustained into 2010.”

The stronger demand forecast led the IEA to increase its estimate for how much crude oil OPEC must produce to meet the world’s needs. The so-called call on OPEC crude for 2010 was increased to 28.5 million barrels a day, up 100,000 barrels a day from last month’s estimate.

The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil supply, yesterday raised its forecast for 2010 oil demand. The producer group estimates that total crude consumption will increase by 750,000 barrels a day, or 0.9 percent, to 85.07 million barrels a day, next year.

OPEC Compliance OPEC is pumping the most since January 2009, as higher prices encourage members to produce above quota, the IEA said. Supplies from the 11 OPEC nations subject to quotas, from which Iraq is exempt, rose by 150,000 barrels a day in October, to 26.48 million barrels a day.

That’s about 1.6 million barrels a day more than the 24.845 million barrels a day target, signifying compliance of about 61 percent, the IEA said. The members complied with 64 percent of the cuts in September, according to the agency’s estimates.

Nigeria pumped the most above its target, followed by Angola, Kuwait, Algeria, Qatar and Saudi Arabia, according to the agency. Production from Nigeria could rise further before the end of the year as it restores damaged infrastructure, the IEA said. North Sea Total OPEC production, including Iraq, rose by 110,000 barrels a day to 28.95 million barrels a day in October, according to IEA estimates.

Production from outside OPEC also rose, led by stronger North Sea production following the end of field maintenance. The IEA raised its estimate for non-OPEC production in 2009 and 2010 on stronger output in the Gulf of Mexico, Norway and Russia. It now expects output this year to average 51.1 million barrels a day, 130,000 barrels more than it forecast last month, and 51.9 million barrels a day in 2010.

That’s 350,000 barrels a day more than its previous estimate. Global oil inventories remain above the five-year average, according to the agency. At the end of September, industrial stockpiles held by members of the Organization of Economic Cooperation and Development were the equivalent of 60 days of consumption, compared to 60.9 days in August, the report said.  

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