blind freddy can see oil has to go higher

IEA ups 2006 global oil demand estimate, lifts 2007 oil demand forecast UPDATE
Tuesday, February 13, 2007 10:41:08 AM
http://www.afxpress.com



LONDON (AFX) - The International Energy Agency raised in 2006 oil demand estimate and upped its 2007 oil demand forecast, citing a large revision to estimates of China's apparent demand

The Paris-based energy watchdog said in its monthly report it now sees 2006 global oil product demand at 84.5 mln bpd - implying an upward revision of 111,000 bpd from the last monthly report

For 2007, the IEA sees global oil product demand totaling 86 mln bpd, an upward revision of 273,000 bpd from the last monthly report

It added, however, that given revisions to the 2005 baseline comparison, the annual demand growth rate for 2006 remains unchanged at 1 pct, while that of 2007 has risen to 1.8 pct

The agency also noted while demand last year in OECD countries recorded its first significant drop since 1985, the drop "does not imply a change in the longer-term trend"

"While OECD oil demand growth has fallen, in non-OECD it has been robust," said the agency

Chinese apparent demand is forecast to reach 7.6 mln bpd for 2007, it noted, while the forecast for growth in oil consumption in non-OECD countries stands at 3.2 pct for this year. Aside from this, there is also a real possibility that demand for fuel oil will improve significantly if, for example, the price of natural gas rockets, demand spikes or there is a sudden supply disruption

As a result, the IEA believes that "barring a global slowdown, in just three years the rate of oil demand growth will once more outstrip the growth of new oil supplies"

The agency has lowered its 2007 forecast for non-OPEC supply by 70,000 bpd to 50.5 mln bpd, as a result of downward revisions to expected supply from North America, China, Ecuador and Argentina

Until recently, the IEA was expecting 2007 supply from non-OPEC countries to improve significantly, so its more tempered expectations imply a reasonably tighter market going forward

Non-OPEC supply aside, the IEA is also concerned about falling supply from OPEC countries. It noted OPEC supply excluding Angola and Iraq fell by 100,000 bpd in January to 27 mln bpd

Although the cartel is still producing 700,000 bpd above its 26.3 mln bpd output target since last November, its compliance is improving and it has scheduled a further 500,000 bpd cut from Feb 1 this year. This February and November targets, if met, would bring OPEC production down to 25.8 mln bpd - a level that could see demand for OPEC crude out- stripping supply from OPEC countries by the second quarter, said the IEA

Following on from this, it warned that over the next few year, "without stronger policies to stem demand growth ... or more rapid growth of oil capacity, the slim respite from the tight spare capacity may prove very brief"

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