Demand growth at 23-year high despite high prices

IEA Summary: Demand growth at 23-year high despite high prices

London (Platts)--10Jun2004


World oil demand growth is running at 2.3-mil b/d, its highest level since
1980, as Chinese demand continues to shrug off record high oil prices and
drive global growth, the International Energy Agency said Thursday.

In its latest monthly report, the IEA raised its forecast for world oil demand
in 2004 to 81.08-mil b/d, up 470,000 b/d from its previous estimate on the
back of strong demand data from Brazil, India, China, the Former Soviet Union
and North America. It said year-on-year oil demand growth was now expected to
reach 2.31-mil b/d this year, or 2.9%, up from an estimate of 1.95-mil b/d in
the previous monthly report. China continues to be the main engine of demand
growth, the IEA report said. Demand for oil products from the country's power
generation, transportation and petrochemical sectors is expected to rise by
1.2-mil b/d in the second quarter compared with the same period of 2003,
following a first quarter increase of 1-mil b/d.

"A run-up in crude and product prices, partly mitigated in early June by word
of OPEC's commitment to production increases, so far does not appear to have
slowed demand growth, but price effects would likely be felt if recent levels
were to be sustained," the IEA said. A number of one-off issues, however, are
also inflating demand, the IEA said. It said expansion of pipelines and a
commercial oil storage capacity is also absorbing "substantial" volumes of
crude and products, the agency said without given volume estimates. On the
supply said, the IEA said world oil production rose to 82.02-mil b/d in May
from 81.55-mil b/d in April. The increase was almost entirely due to a 470,000
b/d increase in output from OPEC with non-OPEC supply little changed. The
IEA's forecasts for non-OPEC oil output were left broadly unchanged from the
agency's previous monthly report, with total non-OPEC supply expected to
average 50.1-mil b/d in 2004, up from 48.9-mil b/d in 2003.

The resulting impact on the expected call on OPEC crude and stocks led the IEA
to raise its estimate by a further 500,000 b/d for 2004 and its 2003 call by
100,000 b/d. Including changes made in its previous monthly report, the IEA
has now increased its call on OPEC crude and stock by 1-mil b/d for 2004. The
call on OPEC crude and stocks is now expected to average 26.9-mil b/d this
year compared with 26.2-mil b/d in 2003. For the second quarter of 2004, the
call was revised upward by 1.1-mil b/d to 25.9-mil b/d with the main driver
being higher projected demand in North America and the FSU, the IEA said. On
stocks, the IEA said industry oil stocks in OECD countries rose 290,000 b/d in
April to end the month at 2.473-bil bbl compared with a downwardly-revised
March figure, driven mainly by a 620,000 b/d build in product stocks in the
Pacific and the US. April's figure was 29-mil bbl above the year-ago month but
73-mil bbl below the recent five-year average, the IEA said.

This story was first published in Platts real-time news and market reporting
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