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Energy watchdog: oil demand weaker than expected in second half of year International Energy Agency cites upward pressure on oil prices due to diminishing U.S. inventories, threat of U.S.-led war against Iraq Bruce Stanley Associated Press Business Writer
Demand for oil was weaker than expected during the second quarter of the year, but crude prices have stayed firm due to diminishing U.S. oil inventories and the threat of a U.S.-led war against Iraq, an industry study said Aug. 9.
Upward pressure on prices offset the dampening effects of tumbling world stock markets and a 2.2 percent increase in OPEC output in June, the International Energy Agency reported.
The IEA, headquartered in Paris, is the energy watchdog agency for the Organization for Economic Cooperation and Development, a group of wealthy, oil-importing nations.
In its monthly oil market report, the IEA made a slight reduction of 50,000 barrels a day in its forecast for demand growth this year. It noted a large decrease in demand in Asia in May, together with a smaller decrease in demand in Europe.
The IEA also announced revised, higher figures for global demand dating back to 1991. It made the changes to reflect what it said had been the under reporting of past crude consumption in Iran, India, Egypt, and several other countries.
As a result, the agency predicted that worldwide demand would rise to revised levels of 76.3 million barrels a day in the third quarter and 78.2 million barrels a day in the fourth quarter.
Crude supplies grow in July Crude supplies, meanwhile, grew to 76.5 million barrels a day in July, up 780,000 barrels a day from June. The IEA attributed this increase to a surge in output from the Organization of Petroleum Exporting Countries.
The 10 members of OPEC, excluding Iraq, boosted their combined production last month by 360,000 barrels a day. The producers’ cartel exceeded its self-imposed output quota by 1.5 million barrels a day, or 6.9 percent, the IEA said.
Jan Stuart, head of research in global energy futures at ABN AMRO, argued that OPEC is busting its quota by even more — 2.2 million barrels a day.
As OPEC members pumped and sold greater “olumes in July, they benefited also from higher oil prices.
The average spot price for North Sea Brent, the European benchmark crude, increased by $1.68 a barrel to an average of $25.81 in July.
OPEC not doing badly “You make hay while the sun shines,” said Peter Gignoux, head of the petroleum desk at Salomon Smith Barney. “OPEC’s not doing badly.”
OPEC member Iraq, whose exports are regulated by the United Nations, increased its daily output by 170,000 barrels in July. Iraq doesn’t participate in OPEC production agreements.
At the same time, production from non-OPEC sources rose by a combined 220,000 barrels a day. Norway, Britain and Australia each increased its output.
Economic uncertainty and the possibility that Iraq might resume its higher, historic levels of production, made it “debatable” whether OPEC would need to increase output later in the year, said Lawrence Eagles, head of commodity research for London brokerage GNI Ltd.
But in spite of the increase in crude supplies, tensions in the Middle East have continued to shore up prices.
Analysts say expectations that the U.S. President George W. Bush might launch a military offensive against Iraq have added a so-called ``war premium’’ of $3 to each barrel of oil.
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