World Oil Demand Reaches 23-Year High

CNN

IEA raises projection in 2004 as China continues to provide accelerating growth.

LONDON (Reuters) – Global economic expansion is fueling the biggest increase in world oil demand for 23 years, but extra supply from producing nations is gradually replenishing consumers’ stocks, the International Energy Agency (IEA) said Thursday.

In its monthly Oil Market Report, the agency raised its projection for incremental oil demand in 2004 by 360,000 barrels a day to 2.3 million bpd, or 2.9 percent.

That scale of growth is the largest since 1981, taking world oil market consumption in 2004 to 81.1 million bpd.

It said oil demand had proved stronger than expected in North America, Brazil and India, despite high oil prices.

The report helped underpin oil prices that have fallen from record highs in the wake of OPEC’s decision to increase supplies.

U.S. light crude rose 12 cents to $37.66 a barrel after having slipped from last week’s 21-year high of $42.45 a barrel.

The IEA praised last week’s decision by the Organization of the Petroleum Exporting Countries (OPEC) to raise oil output, saying that economic growth could not be sustained for the long term at high prices.

Higher supplies from producing countries are slowly refilling storage tanks, giving the global market more of a cushion against the threat of unexpected supply disruptions.

“Producers have reconfirmed their intention to increase crude oil supply. All things being equal, this should moderate prices by allowing stocks to build,” said the IEA, adviser on energy to 26 industrialized nations.
Refineries struggle

Crude stocks have already risen to comfortable levels, but gains in refined product inventory have been slower, as refineries struggle to keep pace with higher consumption, the IEA said.

“The commitment and visibility of fresh oil on the market is welcome. Unfortunately, the pace of the stock build is modest. The system is still undersupplied,” the IEA added.

China continues to provide the lion’s share of world oil demand growth.

The IEA said it expects year-on-year Chinese growth of 1.2 million bpd, or 23 percent, in the second quarter for demand of 6.38 million bpd. That is up from annual growth of one million bpd, or 19 percent, in the first quarter.

But it is forecasting growth in China will slow to 8.2 percent in the second half for average growth in 2004 of 790,000 bpd, or 14.3 percent.

It said China’s imports of crude and petroleum products hit a record 3.39 million bpd in April, up 744,000 bpd from March and 1.44 million bpd higher than in April last year.

Producers under in OPEC cartel’s quota system, led by Saudi Arabia and the UAE, lifted output by 680,000 bpd in May to 26.1 million bpd, boosting supplies in advance of last week’s deal to lift formal limits from July 1, the IEA said.

“Initial signs are that both Saudi Arabia and the UAE in particular will follow up on their May production increases, putting extra barrels on the market in June,” the agency said.