PARIS (AFP) ― The oil market still needs more supplies for the third quarter of the year, the International Energy Agency warned on Wednesday, despite an official stock release and increased OPEC production.
“Major producers have recognized that demand for their oil is rising ... as economic growth and short-term fuel substitution keep global and emerging market demand growth robust,” the IEA said in its monthly report.
“We welcome rising OPEC volumes seen in June (30.3 mbd of output), but the market needs still more oil,” the agency said.
Global demand for oil this year is now expected to be slightly higher than forecast, by 200,000 barrels per day to 89.5 million barrels per day, showing an annual increase from 2010 levels of 1.2 mbd.
Next year global demand will rise by a further 1.5 mbd to 91.0 mbd, the IEA forecast.
The IEA answered critics who argued that its decision on June 23 to release 60 million barrels from strategic stocks for “an initial” 30 days to make up for an almost total cut in supplies from Libya, had come too late and failed to hold down prices.
The agency said the release was “a bridge” between rising oil demand in the third quarter and extra supplies from the Organization of Petroleum Exporting Countries.
Acknowledging that the outlook now “is simply a more vivid version of the one underpinning the IEA action,” it explained that it had not released stocks earlier when disruption in Libya pushed prices up by $10 a barrel because some demand signals were then weak.
In addition, inventories appeared to be high. There was also an assumption that OPEC would move quickly to make good the shortfall.
But demand had begun to rise sharply from June and OPEC had been slow to raise output.
This caused a risk of “renewed, damaging and sustained surge in international prices in the third quarter of 2011,” so the IEA acted even though prices were edging downwards.
Demand from advanced countries in the area covered by the Organization for Economic Cooperation and Development remained weak, but was strong in non-OECD countries, the IEA said. There had been a series of interruptions to production, in addition to the cut in Libyan supplies.
Overall “the outlook this month looks slightly tighter than a month ago,” the IEA concluded.
Estimates for the first half of this year “show demand continuing to run ahead of supply.”
Global supplies of oil increased by 1.2 mbd from the May level to average 88.3 mbd.
Output by OPEC rose in June to 30.3 mbd, up nearly 850,000 barrels a day, after Saudi Arabia increased its production, providing “almost 90 percent of incremental June supplies,” the IEA said.
But current crude oil production in OPEC countries is still “well short of the 31.3 mbd call (expected demand)” for the third quarter, the IEA reported.
The group’s spare capacity “is expected to remain limited while Libyan supplies are constrained,” the IEA said.
Non-OPEC output rose by 0.4 mbd to 52.5 mbd in June and will average a lower 53.1 mbd in 2011, the IEA said.
In 2012, global oil demand will rise by 1.6 percent to 91 mbd, with the increase “expected to be driven entirely by non-OECD countries,” the IEA said.
OECD demand for oil in 2012 will drop by 0.3 percent to 45.7 mbd, the IEA said, on increased vehicle efficiency and a persistent decline in oil-fuelled heating.
In non-OECD countries, given a forecasted GDP growth of 6.5 percent, 2012 demand for oil should jump by 3.6 percent to 45.3 mbd.
Non-OPEC supply in 2012 will rise to 54.0 mbd driven in part by higher conventional crude supply from Canada, Brazil, Australia and China, the IEA said.