oecd oil stocks may fall

IEA official concerned OECD oil stocks may fall
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By Ikuko Kao of Reuters

LONDON - OPEC's output curbs may lead to a decline in oil inventories held by industrialised countries in the next few months, lifting oil prices, the deputy head of the International Energy Agency said.

The Organization of the Petroleum Exporting Countries agreed on March 15 to leave its output targets unchanged while enforcing more strictly its existing supply curbs of 4.2 million barrels per day, agreed since September last year.

As the producer group's compliance with the existing curbs is seen at around 80-90 per cent, stricter enforcement still takes some oil supply out of the market. Oil prices have risen to around $US53 a barrel since the decision.

"Our concern is even though OPEC will stick with the current output target, we may see a decline in OECD stocks as early as June," Richard Jones, IEA deputy executive director, told Reuters on the sidelines of a conference.

Currently crude oil stocks stand at just above year-earlier levels in many countries of the Organisation for Economic Co-operation and Development (OECD), including the world's top consumer the United States, European nations and Japan.

Earlier, Jones said at the conference: "We could see tightening of the oil market. That may mean the price of oil could go above what it is today."

The IEA advises 28 industrialised countries on energy matters.

Oil has fallen from its peaks above $US147 a barrel, reached in July last year, ending its six year rally as global economic crisis eroded oil demand. The plunge in oil prices, hitting as low as below $US33 in December, has caused many oil project delays and some cancellations.

Jones said that oil prices were unlikely to stay at extremely low levels below $US30 for long enough to cause shut-ins of currently producing installations.

"The market has just paused to catch its breath rather than moved into a prolonged period of lower prices," he said.

Jones said project delays and slippages would ease as a result of falling prices of raw materials and construction costs.

Jones also said the global economy and oil demand were still prone to downside risks, but growth in consumption would start to return soon and may ultimately reach an average global increase per year of one million bpd, with 80 per cent of the volume coming from emerging markets, China and the Middle East.

Jones said the amount of worldwide unused oil production capacity has risen to 5-6 million bpd, the highest level since 2002, as a result of OPEC's production cuts.

Still, about 3.5 million bpd of new capacity additions would be necessary every year in the long term to meet expected demand growth in the future, he said.