IEA, OPEC differ on need for more oil supply

By Alex Lawler and Barbara Lewis

LONDON (BestGrowthStock) – Two of the world’s most influential oil forecasters gave sharply different outlooks for 2011 on Friday, as the consumer’s watchdog anticipated robust demand and producer group OPEC said supply was plentiful.

The Organization of the Petroleum Exporting Countries’ relatively bearish outlook makes the case for no change in OPEC supply policy when the group meets on Saturday in Quito.

OPEC forecast 2011 global oil demand growth would increase to 1.18 million barrels per day, only 10,000 bpd more than predicted in last month’s report. Daily demand will average 87.11 million bpd next year.

In its monthly update, the International Energy Agency lifted its 2011 oil demand growth forecast by 130,000 bpd to 1.32 million bpd. That marks a slowdown from the surge of 2.47 million bpd expected this year, from a low base.

Oil prices this week hit $90 a barrel for the first time in more than two years driven, the IEA said, by rising demand. In its view, sustained prices at current levels pose a risk to economic growth.

“Demand had been incredibly strong in the third quarter,” David Fyfe, head of the IEA’s Oil Industry and Markets division, told Reuters.

“We think it’s primarily temporary factors, but we could be surprised to the upside if we get a blast of cold weather and China continues to use more diesel for power generation.”

The Paris-based IEA, which advises 28 industrialized countries, said in its report that OPEC may come under pressure to increase supplies to the market in the new year.

OPEC has yet to be convinced fundamental strength rather than speculation is at the root of rising prices and officials have said they believe consumers can cope with $90 oil.

Its Secretary General Abdullah al-Badri on Thursday said the group wanted a more balanced market before it would increase supplies, even if prices reached $100.

While the IEA forecast OPEC would need to pump 29.5 million bpd next year — up 100,000 bpd from its previous forecast — OPEC left its estimate steady at 29.24 million bpd and cited more than adequate inventories and oil supply capacity.

“The market is expected to have a robust cushion against any sudden surge in demand or disruption in supply,” said OPEC’s report.

DIVERGING VIEWS

The three main oil forecasters — OPEC, the IEA and the U.S. government’s Energy Information Administration, have repeatedly adjusted demand predictions this year as they struggled to interpret mixed evidence of economic recovery.

Friday’s IEA report said oil’s strength probably derived from a surge in consumption in the third quarter of 2010 when demand grew by 3.3 million bpd, showing a convincing recovery from global economic recession.

In 2009 as a whole, oil consumption shrank by 1.15 million bpd.

The IEA said the demand surge in the third quarter was largely driven by industrialized countries, which almost matched expansion in China and other nations outside the Organisation for Economic Cooperation and Development (OECD).

Annual growth reached a peak of 3 million bpd in 2004, led by rapidly rising Chinese consumption, according to IEA figures.

The updated outlooks leave the U.S. EIA as the most bullish on demand next year of the three main forecasters.

The EIA on Tuesday said it expected consumption to rise by 1.43 million bpd next year.

In an update of its medium-term projections, also issued on Friday, the IEA said 2009-2015 world oil demand would grow by an average of 1.4 million bpd each year, higher than its previous forecast made in June.

While it also increased supply projections, the IEA said rising consumption would boost demand for OPEC crude to 32.35 million bpd in 2015.

(Additional reporting by Christopher Johnson; editing by William Hardy)

IEA, OPEC differ on need for more oil supply