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French Version

IEA reduces forecast for oil demand this year

'The market appears to have weathered the storm'

The International Energy Agency shaved on Thursday its forecast for the growth of oil demand this year and next, saying the market appeared to have weathered the latest price shock. But it stressed uncertainty over the effects of hurricane damage in depressing U.S. demand and warned that cold weather or buoyant economic growth could again spark market tensions.

In 2005, global demand for oil would rise by 1.5 percent to 83.3 million barrels per day, and in 2006 by 2 percent to 85 million bpd.

The IEA said that it was revising down its forecast for growth of global oil demand this year by 70,000 bpd to 1.20 million bpd and for next year by 90,000 bpd to 1.66 million barrels.

The agency said: "With crude and product prices now below pre-hurricane levels and refinery and crude capacity returning, the market appears to have weathered the storm.

"But while spot prices are below their peaks, it must not be forgotten that just a few months ago $60 per barrel crude prices reflected extreme market tightness. Moreover there is potential for further tightness to emerge, particularly if the weather [in the northern hemisphere] turns cold and recent buoyant economic growth continues."

The report also said that there had been little sign that an offer by the Organization of Petroleum Exporting Countries to make available spare capacity of two million bpd had been taken up.

World supplies of oil grew by 865,000 bpd in October and averaged 84.4 million bpd, and half of the increase arose in North America. Total global supply in October was 145,000 bpd higher than the figure 12 months earlier.

Gulf of Mexico supply was still down by about 1.1 million bpd from normal levels owing to hurricane disruption, and supplies from the area covered by the Organization for Economic Cooperation and Development were 1.4 million bpd below the figure for October of 2004.

Aggregate non-OPEC supply estimated for 2005 was little changed from the September figure at 50.3 million bpd but the agency said it had increased its estimated supply figure for 2006 by 20,000 bpd to 52.6 million barrels.

Supplies of oil from OPEC had averaged 29.6 million bpd in October. But after allowance for a fall of production by Iran by 220,000 bpd, remaining OPEC production had risen by 265,000 bpd.

Stockpiles of oil held by industry in the OECD area were steady in September at 2.645 billion barrels, or 61.0 million barrels more than the figure 12 months earlier, representing 52 days of consumption from 53 days in August.

Chinese demand for oil, having shown relatively weak growth for some months, had increased by an estimated 8.6 percent in September and demand for most oil products had also been strong. "Apparent demand for gasoline surged by approximately 14.4 percent in September," the agency added.

The IEA said it expected total Chinese demand for oil would rise in 2005 by 3.3 percent, and by 6.5 percent in 2006, after a surge of 15.4 percent in 2004.

The IEA said that the effect of hurricanes in the Gulf of Mexico region might "extend further into 2006" and said it was adjusting down supplies from the Gulf of Mexico area "by a further 75,000 bpd, focused on the second quarter."

The report stressed that demand for oil might have been understated. In particular, it said: "It is important to emphasize that the widely reported drop-off in demand in the weeks following the hurricanes is likely over-stated." It added: "Looking at U.S. crude production forecasts and OECD refinery throughput potential only tells part of the story. What really matters is whether lost oil production in the Gulf of Mexico can be offset by other changes in supply or demand.

"This could be the calm after there storm, or simply the storm's eye - either way, smooth sailing is not assured." Demand for oil in the OECD area fell by 1.4 percent in September on a 12-month comparison and by 1 percent in October, owing to warm weather, high product prices and disruption in the U.S.

But while the effects of the hurricanes were still being felt, "it appears that growth is recovering."

Beirut,11 14 2005
The Daily Star
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