IEA ups forecast for 2008 world oil demand by 115,000 bpd

IEA ups forecast for 2008 world oil demand by 115,000 bpd

A motorist holds a fuel pump at a petrol station in Tehran. The International Energy Agency has raised its forecast for world oil demand for next year by 115,000 barrels per day because of demand from emerging economies.

The International Energy Agency on Friday raised its forecast for world oil demand for next year by 115,000 barrels per day because of demand from emerging economies.

But the agency, the developed world's energy watchdog, in its monthly Oil Market Report lowered its 2007 world oil demand forecast due to lower-than-expected heating fuel consumption in North America and in Europe.

The IEA's monthly report also said that supply-demand balances for winter have "clearly improved" but warned that the market was still nervous, as indicated by oil prices, which are still around 90 dollars a barrel.

"90 dollars a barrel oil makes clear that the market is still on edge and is unlikely to relax until the peak weather risks have subsided and a clear trend in OPEC supplies is apparent," the report said.

For 2007, the IEA now sees world oil product demand amounting to 85.7 million barrrels per day (bpd), a downward revision of 60,000 bpd for the previous month's estimate.

For 2008, however, the agency has revised up its oil demand forecast. It now sees total demand of 87.8 million bpd, an upward revision of 115,000 bpd.

This is due mainly to increased demand from emerging economies, notably Saudi Arabia, as well as expectations of a normal winter after the exceptionally mild northern hemispehere winter this year.

The IEA, which represents mostly western, oil consuming nations, said high oil prices were beginning to squeeze demand in Europe and North America. But at the same time, global supply has begun improving, it said.

While the recent decision by the Organisation of the Petroleum Exporting Countries (OPEC) cartel to keep output quotas steady surprised the market, it had to be viewed in terms of what is happening on the ground.

Output from the 10 OPEC members bound by quotas rose by 400,000 bpd in September, reaching target levels of 27.3 million bpd in October.

In November, however, field maintenance in the United Arab Emirates prompted a dip in OPEC 10 output to 27.1 million bpd.

But this dip was overshadowed by 330,000 bpd increase in Iraqi output between August and November, and an increase of 70,000 bpd in Angolan output.

In addition, world oil supply also rose in November, climbing by 55,000 bpd to 86.5 million on a recovery in Mexican, Chinese and Brazilian output.

"Overall, winter prospects have clearly improved," said the IEA.

There is still a risk demand could peak if winter temperatures plummet. Meanwhile, there is as yet no clear trend in OPEC supplies, which remain relatively unpredictable.

Moreover, stocks in the industrialised countries which are members of the Organisation for Economic Cooperation and Development (OECD) are still on a downward trend, said the IEA's December report.

They fell by 22.4 million bpd in October, lowering demand cover to 52.6 days -- just below the 5-year average.

"Of course, declining stocks are normal in the winter, but at present levels the market is likely to respond quickly if the currently higher OPEC supplies drop off," said the IEA.