|
Energy watchdog raises world oil demand estimates
Bruce Stanley Associated Press Business Writer
Signs of an accelerating global economy, propelled by torrid growth in China, has led the International Energy Agency — a watchdog for the world’s biggest oil-importing countries — to boost estimates for crude demand for this year and 2004.
In its influential monthly oil market report, the IEA said Nov. 13 that it has increased its forecast for average daily demand growth in 2003 by 170,000 barrels, arguing now that demand will grow this year by 1.28 million barrels a day. The Paris-based agency expects daily oil demand to average 78.6 million barrels in 2003.
The IEA also raised its estimate of demand growth in 2004 by 20,000 bpd to 1.08 million bpd, for an average daily world demand of 79.6 million bpd.
Although global oil demand should increase by a robust 1.7 percent in 2003, growth will ease somewhat to 1.4 percent in 2004, the IEA said. It attributed this likely slowdown to nonrecurring, one-time factors that have contributed to oil demand this year, including high prices for natural gas — a substitute fuel for oil — and unusually cold weather in Europe and Japan. China will overtake Japan as oil consumer this year Chinese oil demand is set to rise by 9 percent this year. At this rate, China will overtake Japan as an oil consumer in the second half of 2003, the agency said.
“At this juncture, China is the engine of oil demand growth with significant room for further expansion in the industrial and transportation sectors,” the report said.
Despite some concerns that the Chinese economy may overheat, the IEA expressed confidence in the country’s continued strong demand for crude in 2004. China alone should account for nearly 30 percent of global growth next year, after contributing roughly 35 percent in 2003, the report said.
Together with China’s standout performance, a surge in U.S. growth in the third quarter and gathering momentum in Japan and parts of Europe are helping to offset lingering economic uncertainties such as international terrorism and high levels of household debt.
“Overall, it’s a better picture being painted than we saw a month or two ago,” said Rob Laughlin, managing director of London-based brokerage GNI Man Financial. A “feel-good factor” has already started to affect the oil market’s outlook for demand growth for the three months starting in December, he said. China demand could squeeze supplies Laughlin even sounded a note of caution about China, which for much of the year has served as “a dustbin for oil that couldn’t find a home” anywhere else. If China’s economy continues to sizzle, it could eventually squeeze supplies required by Western countries as they regain their own appetites for crude, he said.
Despite a month of volatile prices, futures contracts rose in October by an average of $2.05 per barrel for light, sweet U.S. crude and $2.57 for North Sea Brent crude. December contracts of U.S. crude were trading Nov. 13 at $31.55 on the New York Mercantile Exchange, while contracts of December Brent were trading at $29.20 on the International Petroleum Exchange in London.
As for supplies, world oil output surged in October by 1.2 million bpd to 80.9 million bpd, the IEA said. Output by the Organization of Petroleum Exporting Countries rose by more than 400,000 bpd to 27.2 million bpd. Iraqi production accounted for nearly half of this increase, although the recovery in Iraq’s output slowed compared with the three previous months, the report said.
Supplies from Russia and other non-OPEC producers grew even faster, with 725,000 more bpd in October than in September, it said.
OPEC members, who agreed to cut output by 900,000 bpd starting in November, plan to meet Dec. 4 to reassess market conditions. If they decide then to make deeper cuts, the IEA said they are unlikely to win over non-OPEC producers to such a strategy unless prices fall “substantially.”
| 