The world's need for oil will rise 2.5 per cent this year following a surge in use this summer, says an official report.
The increase in global oil demand, by 2.1 million barrels a day (bpd), is expected to support current high prices of about US$80 a barrel. Yesterday's report by the International Energy Agency (IEA), a group of energy importing countries based in Paris, raised the group's forecast for demand growth by 300,000 bpd - equivalent to more than half the UAE's daily consumption level - from 1.8 million bpd.
The group revised its outlook for both this year and next following an unexpected increase in consumption in industrialised countries . Stimulative US monetary policy "and signs that China will engineer a soft landing for the economy have encouraged a belief in resilient demand growth", the IEA said. "OECD [Organisation for Economic Co-operation and Development] demand showed significant yearly growth for the first time since 2005."
The forecast echoes comments by the IEA's chief economist on Tuesday that he did not expect the world to experience a "double dip" recession. "When I look at developing nations such as China, the Middle East and Russia, which can be seen as leading indicators, they do not signal a double dip," Fatih Birol told Reuters. "They may save the rest of the world." The IEA's estimate for consumption this year, however, is almost twice that of OPEC, which said in its own report on Tuesday that it forecast global demand rising by only 1.3 per cent this year.
"The world economy received a rally of government aid in the first half of the year, helping world oil demand to grow by more than 1 million bpd," OPEC said. "However, depletion of government funds will leave oil demand forecasts for the second half a little below previously anticipated growth." World oil demand is closely tied to estimates for economic growth, which will remain precarious going into next year, both the IEA and OPEC warned.
The two groups have similar forecasts for next year, with the IEA expecting oil consumption growth of 1.2 million bpd and OPEC anticipating growth of 1 million bpd. This summer's surge was driven in part by several extraordinary factors, including unusually hot weather in East Asia and the stockpiling of heating oil in Germany, the IEA said. "At the risk of appearing a 'party-pooper' for market bulls, our prognoses still suggest to us that benign market fundamentals could persist well into 2011," the IEA said.
OIl prices have remained relatively stable for more than 18 months, holding within about $65 to $80 a barrel. Prices for US crude rose above $82 a barrel yesterday, pushed up by the IEA forecast and strong oil import data from China. Oman crude traded on the Dubai Mercantile Exchange rose $0.73 to $81.51 a barrel. Within the Middle East, Iran has weakened as a centre of consumption growth as a result of international sanctions, the IEA said. Iran's July petrol demand fell 15.1 per cent compared with the same month last year, the group said, and fell even further last month and in August.
"This dip appears to be related to toughened international sanctions prompted by the country's nuclear programme," the report said. Saudi Arabia, however, burned a record 915,000 barrels of crude every day in August to produce power, the IEA said, compared with a peak of just over 750,000 bpd last summer.