PARIS, 12 May 2005 — Global oil demand this year is set to be slightly higher than previously expected, as the market readjusts from last year’s demand surge, the International Energy Agency said yesterday.
Oil demand is now seen rising by 2.2 percent this year to 84.3 million barrels per day, the IEA calculated, revising up by 0.1 percentage points its April forecast. “The oil market is still rebalancing from last year’s demand surge,” the IEA judged.
It said that demand pressures in China and the United States had continued to ease, and that it had revised downwards its estimate of demand in Europe, but consumption in some other regions had risen. Demand by countries in the Pacific, the rest of Asia, the former Soviet Union and the Middle East had increased, the agency said in its May report.
The rise in US stocks, coinciding with high prices, was prompting the widest divergence in opinions about the established relationships between stocks and prices, the IEA said.
The agency held the view that this relationship had broken down. “Some see the co-existence of high prices and high US stocks as a speculative phenomenon, others as a harbinger of pending price weakness. Others, including ourselves, see it as both a cyclical and a regional issue,” it said.
The agency raised the possibility of a rapid tightening of the US crude market, “particularly if currently unfavorable price differentials continue to hamper imports”. Overall, world demand for oil in the first quarter of 2005 seemed to have been slightly less strong than had been expected, rising by 1.83 million barrels per day or by 0.29 million barrels less than forecast.
Growth of demand had slowed down sharply in China and the United States which had been the main forces behind demand growth in 2004. Demand in China had grown by 4.5 percent or by 280,000 barrels per day, compared with a surge of 19.3 percent in the first quarter of last year.
Demand in the United States had grown by 1.2 percent compared with 1.7 percent in the previous period. The IEA was also relatively reassuring regarding consumption expected in the fourth quarter of this year.
Analysts have expressed some concern about the outlook for this tense period for oil supplies as winter, and demand for stocks of heating fuel, builds up in the northern hemisphere. But the agency said that it expected growth of demand to slow to 1.7 million barrels per day after an increase of 2.4 million barrels per day in the fourth quarter of last year.
However, the IEA conditioned this by saying that events depended on the severity of the weather and the strength of growth of the US economy. China’s fourth-quarter demand growth was projected at 8.0 percent, down from an “apparent” 11.5 percent surge a year earlier. The IEA noted signs, such as slowing auto sales, that government efforts to slow the economy, and thus energy demand, may be taking hold.
On the supply side, the IEA said that supplies had risen by 0.435 million barrels per day in April from the March figure to 84.5 million barrels per day. Members of the Organization of Petroleum Exporting Countries had increased their output by 480,000 barrels per day to 29.4 million barrels. Expected demand for OPEC oil in 2005 remained at 28.5 million barrels a day or 300,000 barrels more than in 2004.
The IEA was created after the first oil shock in the 1970s mainly to help countries in the Organization for Economic Cooperation and Development to ensure that they had adequate supplies of energy.
The agency said that oil stocks in OECD countries had fallen by 5.0 million barrels in March from the February figure to 2.587 million barrels, representing 53 days of consumption or two days more than 12 months ago.
However, on a 12-month comparison, the amount of oil in stock had risen by 119 million barrels. In the whole of the first quarter of 2005, stocks of oil had risen by 240 million barrels in contrast to the usual seasonal trend, the agency said.
Meanwhile, world oil prices fell yesterday. New York’s main contract, light sweet crude for delivery in June, dropped 57 cents to $51.52 per barrel in early deals.
In London, the price of Brent North Sea crude oil for delivery in June lost 43 cents to $51.00 per barrel.
Crude stocks in the United States are at their highest levels since March 2002, according to yesterday’s weekly government snapshot from the US Department of Energy (DoE).
The DoE said crude oil inventories for the week ending May 6 increased 2.7 millions barrels to stand at 329.7 million, beating market forecasts of an increase of 1.5 million. Reserves of gasoline rose by 200,000 barrels to 213.7 million, against expectations of a one-million-barrel increase, the DoE added.
