OPEC Raises Forecast for Oil Demand

LONDON, 17 February 2005 — The Organization of Petroleum Exporting Countries (OPEC) yesterday raised its forecast for 2005 global oil demand following upward revisions to world economic growth.

OPEC said it saw world oil demand this year of 83.78 million barrels per day (mbpd) — a rise of 2.11 percent compared to the previous year. That is equivalent to an additional 1.73 mbpd and is modestly larger than OPEC’s previous estimates of a 2.0 percent increase from 2004.

World oil demand for 2005 was “revised upward in line with projections for stronger world gross domestic product growth”, OPEC explained in its monthly oil market report. The 11-nation oil organization said that demand for 2004 was estimated to have grown by 3.21 percent — or 2.55 mbpd — from 2003.

OPEC said the world economy was expected to grow by 4.21 percent this year, slightly up from previous estimates of 4.12 percent. “Oil consumption is expected to grow in all major regions, with the sole exception of OECD Pacific (Japan, South Korea, Australia, New Zealand) where demand will contract by around 1.0 percent,” the report said.

“Within the developing economies, the Middle Eastern countries, with their solid economic growth — estimated at 6.63 percent for the present year — will consume considerably high amounts of oil,” it said.

China’s annual economic growth for 2005 was revised upward to 8.0 percent for 2005 from 7.8 percent. That would mean an increase in predicted Chinese oil demand by 7.66 percent from the previous year, to more than 7.0 million barrels per day, against 6.9 mbpd estimated in January.

“The significant increase in China’s fourth-quarter 2004 demand — although preliminary and still subject to possible revisions — leads us to believe that problems and bottlenecks still remain,” the OPEC report added, citing problems within the electricity sector.

World oil prices retreated yesterday after US data showed big rises in crude and gasoline stocks. New York’s main contract, light sweet crude for delivery in March, rose 21 cents to $47.05 a barrel in early deals. In London, the price of Brent North Sea crude oil for delivery in March lost 22 cents to $45.17 a barrel.

“The numbers were extremely bearish (and) the builds in gasoline and crude oil were bearish,” said Societe Generale analyst Deborah White.

The US Department of Energy (DoE) said in its weekly report that crude stockpiles rose by 2.1 million barrels to 296.4 million barrels during the week ending February 11 — placing them in the upper half of the average range for this time of the year.

While gasoline reserves rose 4.9 million barrels to 221.7 million, distillates - including heating fuel - fell by 3.1 million barrels to 112.5 million, the DoE said. “

The market focus was moving away from distillates and toward gasoline supplies as the summer driving season approaches — when many Americans take to their cars for holidays. The American Petroleum Institute (API) said its survey showed a rise of 5.58 million barrels to 298.17 million over the past week.

The API also reported a drop of 3.1 million barrels to 114.21 million barrels for distillates, and a rise of 4.29 million barrels to bring gasoline reserves to 222.06 million barrels.

In London, Greenpeace activists stormed International Petroleum Exchange at 1400 GMT yesterday, causing a temporary halt to oil trading in a protest to coincide with the Kyoto Protocol taking effect.

Oil consumption in China will rise sharply by 2010, with more than half of the country’s demand being met through imports, state press reported yesterday.

Meanwhile, China’s demand for oil is expected to hit 350 million to 380 million tons by 2010, the Oriental Morning Post cited Gao Shixian, a director with the Energy Research Institute under the National Development and Reform Commission, as saying.

Gao estimates that China will need 180 million to 200 million tons, or more than 50 percent, of imported oil in five years if it is to power the factories responsible for last year’s economic growth of 9.5 percent.

Already the world’s second largest user of oil after the United States, China’s total consumption of crude oil this year is expected to reach 320 million tons, an almost 12 percent rise over the 288 tons used last year.

The country became a net importer of oil more than 10 years ago and at the behest of the central government China’s oil majors have aggressively moved overseas to try and diversify holdings.

China’s 2004 crude oil imports rose 34.8 percent to 120 million tons on the back of strong demand, according to official data. Imports topped 91 million tons in 2003, up 31.29 percent over 2002.