March 11 (Bloomberg) — Oil demand this year will rise faster than expected because of cold weather and growing economies in the U.S. and China, straining the ability of producers to keep pace, the International Energy Agency said.
The IEA, an adviser to 26 industrialized nations on energy policy, raised its forecasts for demand and the amount of oil needed from OPEC for a third straight month. Oil consumption will be 84.3 million barrels a day this year, 330,000 a day more than last expected. Use will rise 1.81 million barrels a day, or 2.2 percent, the Paris-based agency said in a monthly report.
Crude prices have jumped 21 percent this year in New York and challenged their October record of $55.67 a barrel, the highest in more than two decades of futures trading. The gain came amid increasing concern that higher demand may strain the Organization of Petroleum Exporting Countries.
“The reality is that oil consumption has caught up with installed crude and refining capacity,” the IEA said today. “Oil is dominated by a U.S.-centric focus, which does not appear to explain the recent price rise,” because of rising stockpiles there. “Look at the global picture and the recent rally makes more sense.”
Oil consumption last year soared 3.4 percent, the biggest gain since 1976.
OPEC, producer of about 40 percent of the world’s oil, and the U.S. Energy Department also raised their demand growth forecasts in the past month.
More OPEC Oil
The IEA raised its estimate for this year’s supply from non- OPEC countries by about 90,000 barrels a day to 51 million barrels a day. OPEC needs to pump an average of 28.6 million barrels a day to meet demand this year, 200,000 barrels a day more than forecast in the previous report. Most of the increase will go to meet higher-than-expected use in the first half of 2005 because of cold weather in the Northern Hemisphere, the IEA said.
OPEC will need to produce 27.4 million barrels of oil in the second quarter to meet demand, the IEA said, 400,000 more than expected a month ago.
“Capacity limitations are once more being tested by strong demand growth, keeping prices high,” the IEA said.
World oil supply rose by 885,000 barrels a day in February from January, to 84.3 million barrels a day, the IEA said. OPEC’s output climbed by 390,000 barrels a day to 29 million a day, mainly because of higher production from Nigeria, Kuwait and Saudi Arabia.
Analysts, traders and investors are increasingly saying that a seasonal drop in consumption in the second quarter is unlikely this year because of soaring demand from developing countries including China, India and Brazil. Refiners are stockpiling oil in preparation for rising gasoline demand in the second and third quarters and for heating fuels in the fourth.
Industry stockpiles of crude oil, gasoline and other oil products held by nations of the Organization for Economic Cooperation and Development fell by 3 million barrels in January, to 2.573 billion, enough to satisfy demand for 51 days. The days of so-called demand cover were unchanged from December even after the higher consumption forecasts, the report said.
OPEC is monitoring oil inventories in OECD countries. At its last meeting in Vienna on Jan. 30, OPEC President Sheikh Ahmad Fahd al-Ahmad al-Sabah said inventories rising to the equivalent of 56 days of demand would raise concern of a surplus. The organization meets in Isfahan, Iran, next week.