Global oil demand will rise 1.2 million barrels per day (bpd) to 92.4 million bpd in 2014, or 240,000 bpd above the Paris-based agency’s forecast last month.
The increase is being driven by the rise in United States demand to more than 20 million bpd, America’s highest levels since the height of the 2008 global financial crisis.
The IEA’s forecast is easing fears that oil exporters would not only have to compete with increased hydrocarbons output in North America, but would also need to cope with a decline in US demand that has helped to drive down exports over the past years.
Greater demand growth could also make room for a potential rise in Iranian exports as sanctions are lifted following Tehran’s nuclear agreement with six world powers last month.
For now, Iran’s impending hydrocarbons exports have yet to affect energy prices because of stronger demand from developed countries and continued disruptions in Libya’s oil industry, according to the IEA.
“The Geneva deal, regardless of its political significance, has not been the watershed moment some had hoped for,” the IEA report said.
“The market reaction to the deal … was muted.
“Far from easing at the prospect of rising Iranian supplies, oil prices have been firming in the recent weeks on stronger-than-expected OECD [Organisation for Economic Cooperation and Development] demand, resurgent refining activity and continued disruptions in Libyan exports.”
The prospect of rising Iranian exports, however, could eventually challenge Opec, the oil exporters’ club, the IEA warned.
“Making room for Iran – assuming it could quickly ramp up production after years of sanctions – could be a challenge for other producers, especially in the face of rising non-Opec supplies,” it said.
Already, Iran has made clear its intention to regain lost market share, particularly as its neighbour Iraq targets raising its production to an eventual 9 million bpd.
Iran would pump 4 million barrels per day “even if the price drops to $20”, said Bijan Namdar Zanganeh, the Iranian oil minister.
The IEA also raised its 2014 estimate for global demand for Opec output by 200,000 bpd to 29.3 million bpd. Last month, Opec’s output dipped by 160,000 bpd to 29.7 million bpd, the fourth straight month of decline, because of production cuts in a few member countries, including the UAE, said the IEA.