World oil demand will rise the most since 1988 as economic growth accelerates and consumption surges in China, said the International Energy Agency, an adviser to 26 industrialized countries on oil policy.
Global use of gasoline, diesel and other fuels will rise this year by 1.95 million barrels a day, 270,000 more than forecast last month, to 80.6 million barrels daily, the Paris- based agency said in its monthly report. The IEA has raised the growth projection in every report this year, increasing the estimate from October’s forecast of 1.06 million barrels.
The outlook comes with crude oil trading at a 13-year high of more than $40 a barrel in New York, heightening concern that rising prices will slow economic growth. U.S. gasoline prices are reaching record highs, and airlines such as British Airways Plc and Qantas Airways Ltd. are raising fares.
“Demand growth has been strong,” said Adam Sieminski, Deutsche Bank’s oil strategist in London. “Since we’re looking at history, the report explains why we have 40 dollar oil.”
Brent crude oil for June delivery rose 20 cents to $37.56 a barrel on the International Petroleum Exchange in London at 10:00 a.m. On the New York Mercantile Exchange, June crude oil was up 23 cents to $40.29 in electronic trading.
Surging crude prices have led to increasing calls from oil consumers for the Organization of Petroleum Exporting Countries to pump more oil. Saudi Arabia, the world’s top oil exporter, this week urged its OPEC colleagues to raise output.
OPEC President Purnomo Yusgiantoro said in a statement today the group is encouraging its members to increase supplies. OPEC ministers will gather informally at an energy forum in Amsterdam starting May 22 to discuss rising prices, he said.
“The demand is significant; it’s symptomatic of stronger global economic growth,” said Lawrence Eagles, an analyst at the IEA. “China remains one of the major drivers. With prices at $40 a barrel, the market has already sent the message and has been sending the message for some time that more oil is required.”
The 30-nation Organization for Economic Cooperation and Development, which is aligned with the IEA, yesterday raised its forecast for economic growth in member-nations this year to 3.4 percent from the 3 percent it predicted in November.
Less Outside OPEC
The IEA also cut its estimate of oil supply from countries outside OPEC. Those nations will boost output by 1.17 million barrels a day this year, 100,000 barrels a day less than forecast last month, to 50.09 million barrels a day, because of lower expectations for regions including the Gulf of Mexico and Oman.
China last year surpassed Japan as the world’s second- largest oil consumer after the U.S., in part because of rising car sales. Chinese demand will rise by 13.6 percent this year to 6.24 million barrels a day, the IEA said.
Measures by China’s government to cool economic growth probably won’t have a “significant impact on oil demand in the short term,” the report said.
The expected growth in world demand this year is the largest in absolute terms since 1988, the report said. In percentage terms, it matches the 2.5 percent rise last seen in 1996, before Asia’s fiscal crisis curbed consumption.
Fuel inventories are shrinking as demand gathers pace. Stocks of crude and fuels held in the 30 OECD nations fell by a net 280,000 barrels a day in the first quarter, the IEA said.
Inventories in March rose by 210,000 barrels a day to 2.47 billion barrels, equaling 52 days of demand, up one day.
Saudis Urge Increase
Saudi Arabia’s oil minister, Ali al-Naimi, on Monday called for OPEC to boost its production quota at least 1.5 million barrels a day. Members are still pumping more oil than their official output limits because prices are rising, the IEA said.
The 10 OPEC nations outside of Iraq who agree to quotas produced 25.4 million barrels a day in April, 1.9 million more than their collective target as of April 1, the IEA said. In Iraq, daily supply averaged 2.34 million barrels a day.
The IEA raised its estimate of the need for oil from the group, also known as the call on OPEC. At a meeting on March 31, OPEC reaffirmed a February decision to lower its output quota by 1 million barrels a day, or 4 percent, from April.
Demand for OPEC oil will average 26.4 million barrels a day this year, 500,000 more than forecast last month, the IEA said. This quarter, the market will need 24.8 million barrels a day from the group, 600,000 more than expected previously.
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