IEA Sees ‘Looming Crisis’ As Oil Data Worsens

LONDON (Dow Jones)–The International Energy Agency warned Tuesday of “a
looming crisis” in its widely watched energy data, conceding its ability to
measure oil-market fundamentals may actually have worsened recently as
less-transparent developing countries are consuming more of the world’s
petroleum.

10-26 11:34: UPDATE: IEA Sees ‘Looming Crisis’ As Oil Data Worsens
DJ UPDATE: IEA Sees ‘Looming Crisis’ As Oil Data Worsens

(Updates with additional remarks from IEA Executive Director Claude Mandil.)

By Sally Jones and Adam Smallman
Of DOW JONES NEWSWIRES

LONDON (Dow Jones)–The International Energy Agency warned Tuesday of “a
looming crisis” in its widely watched energy data, conceding its ability to
measure oil-market fundamentals may actually have worsened recently as
less-transparent developing countries are consuming more of the world’s
petroleum.

The situation has become so bad that a new legal framework may be needed to
get data accuracy back on track, the agency said. The admission acknowledges
complaints from some in the industry about the quality of the IEA’s reports on
oil supply, demand and inventories – reports that can move markets and affect
policy decisions.

“Our statistics may prove not to be representative of reality, and that may
be more than in the past,” EIA Executive Director Claude Mandil said.

In its long-term World Energy Outlook, the agency, which represents the
energy interests of the 26 members of the Organization for Economic Cooperation
and Development, said it has taken the “unusual step of raising this issue
because we believe there is an urgent need to preserve the reliability of our
statistical base.”

“These lapses compromise the completeness of our statistics,” the IEA said in
its report. “They could seriously affect any type of analysis, including
modeling and forecasting.”

This year, with prices soaring, there have been murmurs of dismay from some
in the industry over the number and degree of revisions the agency has made,
particularly to figures on global oil demand.

Like many forecasters, the IEA failed to predict the surge in consumption
that blindsided markehis year, stretching producers to the limit and
sending prices to record highs above $55 in New York.

Even late last winter, the IEA was warning of a looming spring supply glut
that never materialized. The Organization of Petroleum Exporting Countries
cited that forecast when it decided in February to cut back its output despite
high prices.

While the strength of demand is now apparent, the agency continues to make
upward revisions. In its October monthly oil market report, the IEA said world
oil demand in the July-September quarter was 600,000 barrels a day more than it
had forecast a month previously.

Government Data Blamed

The agency pinned some of the blame on governments. National data, it said,
are often subject to lapses and frequently prove inconsistent. The problem is
made worse by the increasing share of world oil consumed by countries with
low-quality statistics. Though Mandil didn’t name them, China and India have
been big drivers of this year’s oil demand growth.

Energy market liberalization that has replaced state-owned utilities with
hundreds of independent companies and a lack of funding for government data
gathering have contributed to the problem, the IEA said.

The agency said Tuesday that it is seeking higher statistical standards and
better funding from contributing governments, adding the legal framework for
data gathering must be revisited.

“A more reliable and transparent system is needed urgently, especially for
investor confidence,” IEA Chief Economist Fatih Birol said.

One solution, the IEA said, is the three-year-old Joint Oil Data Initiative
between OPEC, the IEA, Eurostat and others. Its goal is to create a reliable
system that allows closer monitoring of oil production, including reserves and
the performance of existing fields.

Progress has been slower than expected, Mandil conceded, but noted that at
JODI’s last meeting in Indonesia some two weeks ago, China agreed to provide
up-to-date demand data within the next six months.

“It’s progress, and we expect to make more in the future,” Mandil said. “The
earth’s oil resources are adequate to 2030 and well beyond, but not everybody
is convinced, because the data is uncertain. This is bad for investors. We are
not sure the private money will come to finance oil development.”

-By Adam Smallman, Dow Jones Newswires; +44-20-7842-9343;
adam.smallman@dowjones.com

-By Sally Jones, Dow Jones Newswires; +44-20-7842-9347;
sally.jones@dowjones.com

(Karen Matusic in Washington contributed to this article.)

(END) Dow Jones Newswires

10-26-04 1434ET

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KEYWORDS: FSN62786 CET ENERGY GENERAL