The International Energy Agency has revised its medium-term global oil outlook, predicting higher oil demand in the next five years than it expected just six months ago.
The Paris-based agency that advises rich countries on energy issues also now projects rising demand for OPEC's crude oil between 2009 and 2015 and warns of "jittery" energy markets as OPEC's spare production capacity shrinks.
The IEA released the update on Friday, the day before OPEC ministers were to gather for their final meeting of the year in Quito, Ecuador, and as crude hovered near US$90 per barrel.
"Fingers still point at shadowy 'speculative inflows' to futures and derivatives markets, but a more plausible foundation for price strength lies with now apparent third quarter fundamentals," the IAE said in its lastest monthly oil market report.
"Upward demand revisions have outstripped those for supply, and suggest that global demand grew by a giddy 3.3 million barrels per day (bpd) year on year in the third quarter," the agency said. "This implies a global net stock draw of some 1.3 million bpd, the largest since the fouth quarter of 2007, showing that fundamentals do matter, even if they sometimes only become evident after the event."
OPEC has blamed "market speculation" and US dollar weakness for crude's recent rise above the $70-80 price band in which it had stabilised for more than a year prior to last month.
"Growing interest in the futures market was reflected in increasing volume of trading contracts," the oil exporters'organisation said on Friday in its November market report.
The IEA has a different interpretation of the oil price rebound, based on market fundamentals.
"Harsh northern hemisphere weather, allied to electric power rationing in China, if sustained, could push short-term demand higher and tighten market balance further," it warned.
The agency's global oil demand forecast for this year and next was about 1.1 million bpd higher than anticipated in June. Projecting the same growth rate as previously forecast from next year onwards, the IEA now expects demand to reach 93.4 million bpd by 2015, up from 87.4 million bpd this year.
It predicted that OPEC would need to supply 32.35 million bpd of oil to meet demand in 2015, a 10 per cent increase from this year's call on OPEC crude. Over the same period, the IEA expected 30 per cent of OPEC's effective spare output capacity to be absorbed, reducing it from more than 5 million bpd to about 3.6 million bpd.
The predicted narrowing of the spare capacity margin was "symptomatic of a tightening and potentially more jittery market,"the IEA said.
"We continue to argue that maintaining this valuable supply cushion should provide the impetus for sustained investment" in new energy supplies and energy efficiency, it added.
Among OPEC producers, Iraq was expected to develop the most new oil output capacity in the medium term, adding 1.1 million bpd by 2015, followed by the UAE, which was on track to add another 500,000 bpd, the agency said. By contrast, Iran's production capacity was forecast to shrink from 3.9 million bpd to 3.1 million bpd.
"For the medium term, claims about a physical oil supply peak seem very wide of the mark. Nonethless, … the industry still has to run pretty hard just to stand still," the IEA said.
In a more bearish forecast, OPEC predicted the stronger than expected rebound in oil demand this year would suppress next year's growth.
"Energy eficiency policies along with the use of biofuel will put more downward pressure on oil consumption worldwide,"it predicted.
OPEC forecast a 300,000 bpd increase in the call on its crude next year, unchanged from its projection last month.
The one issue on which both groups agreed was that that market volatility was likely to increase, albeit for different reasons.
"Despite a convergence of views that fundamentals are improving, the market is still facing a large degree of uncertainty," OPEC said. "Over the medium and long term, the level of uncertainty is even greater.
"In addition to the uncertain direction of the global economy, there is also a lack of clarity over the impact that energy and environmental policies in several major consuming countries will have on future oil demand."