OPEC expects world oil demand to rise by some 2 million barrels per day in the third quarter from a seasonal second quarter low, as consumption growth hits a seven-year high, the cartel said Thursday.
Driven by strong world economic growth, it also expects oil demand to increase by another 2 million bpd in the fourth quarter to hit 82.49 million bpd from an expected 80.47 million bpd in the third quarter, it said in a monthly report.
The producers’ cartel also revised upwards its average world demand forecast for 2004 by 0.17 million bpd to 80.58 million bpd.
This indicates growth of 2.41 percent, the highest rate since the 3.12 percent registered in 1997, OPEC said.
“Fueled by the remarkable pace of growth in the world economy, the strength of the ongoing surge in oil demand was not fully anticipated until rather late,” the report from OPEC’s Vienna Secretariat said.
“The surprising record rise in consumption has led to continuous upward revisions to demand projections for 2003 and 2004, and has created a time lag in the entire supply chain.”
Demand has been led by strong consumption, especially of gasoline in the run-up to the driving season in the United States, where solid economic recovery is in place and inflation, although rising, remains under control, OPEC said.
“The U.S. recovery has the character of a strong, non-inflationary expansion led by a high and growing level of domestic demand,” it said.
OPEC said government efforts to cool the Chinese economy were beginning to take effect, potentially slowing fierce oil demand growth.
Asian crude imports slowed in May after weaker regional demand and poor shipping economics limited buying, the monthly report said.
OPEC said its May production, based on secondary sources, rose 240,000 bpd to 28.2 million bpd, with supply from the 10 members bound by quotas up 640,000 to 26.32 million bpd.
Iraq, which has no quota, dropped by 400,000 bpd to 1.96 million bpd.
Non-OPEC supply for 2004 was forecast to rise by 1.34 million bpd from the 2003 estimate to 50 million bpd, with the bulk of the increase flowing from Russia and Kazakhstan.
After prices for U.S. crude spiked to 21-year highs, OPEC on June 3 agreed to increase its production quotas by 2 million bpd from July 1, with a further 500,000 bpd pledged from August 1, taking its formal ceiling to 26 million bpd.
It meets again on July 21 in Vienna to review policy.
“Current price levels, well above the upper level of the expected range, are due to factors other than inventory levels,” OPEC said.
“For now the market still appears to be able to absorb rising crude oil supply,” it added.