Oil market to remain tight over medium term - IEA

01 July 2008 11:05  [Source: ICIS news]

LONDON (ICIS news)--Demand growth in developing countries and supply constraints are expected to keep the oil market tight over the medium term, despite weaker economic growth forecasts and rocketing prices, the International Energy Agency (IEA) said on Tuesday.

 

The Paris-based IEA said oil demand growth remained concentrated in developing countries, with 90% of the growth spread between Asia, South America and the Middle East.

 

Non-OPEC crude supply was expected to remain at or below 39m bbl/day even with a considerable increase in investment, with the majority of the 1.2m bbl/day in non-OPEC liquids growth coming from natural gas liquids (NGLs), condensates and biofuels.

 

IEA said there were significant downward revisions for both non-OPEC supplies and OPEC capacity estimates from last year’s medium term report, with project delays remaining a major factor in supply-side underperformance.

 

Five-year forecasted global net decline was increased to 5.2% from 4% in last year’s report, meaning 3.5m bbl/day of new production would be needed each year just to hold world production steady.

 

A poor supply-side performance since 2004 and strong demand pressures from developing countries has forced up oil prices sharply to curb demand, with futures prices doubling in the past year.

 

“While recognising that [futures] speculation can have a day-to-day impact on price moves, the fact that all producers are working virtually flat out and that there is no sign of any abnormal stockbuild gives a strong indication that current oil prices are justified by fundamentals,” said the IEA report.

 

Global balance forecasts (m bbl/day)

 

	2008	2009	2010	2011	2012	2013
Global demand	86.87	87.74	89.20	90.74	92.39	94.14
Non-OPEC Supply	49.92	50.54	50.60	50.68	50.68	51.08
OPEC NGLs, etc	5.13	5.94	6.52	6.82	7.07	7.21
Global supply excluding OPEC crude	55.05	56.48	57.12	57.50	57.75	58.29
OPEC crude capacity	35.34	36.44	37.35	37.25	37.58	37.87

 

Source: IEA

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By: Mark Watts
+44 20 8652 3214

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