London (Platts)--9Jul2007

The International Energy Agency Monday delivered a stark new warning of
increasing tightness on world oil markets over the next five years, despite
the high oil prices of the past four years.

     Global oil demand is now forecast to grow at an average annual rate of
2.2% between 2007 and 2012, accelerating beyond the 2% annual growth rate for
the 2006-2011 period projected by the IEA in February this year.

     The agency said in its 2007 Medium-Term Oil Market Report that it saw
world oil markets becoming increasingly tight beyond 2010, "with OPEC spare
capacity declining to minimal levels by 2012." The report projects that OPEC
spare capacity could be as low as 1.55 million b/d in 2012.

     The IEA forecasts OPEC crude capacity at 38.4 million b/d in 2012, up
from an estimated 34.4 million b/d in 2007 but "below OPEC's own estimates of
near 40 million b/d for 2010." Of the 4 million b/d increment over the next
five years, Saudi Arabia is expected to account for 1.8 million b/d, and the
UAE and Angola 500,000 b/d each.

     Demand for OPEC crude plus inventory changes is seen rising from 31.3
million b/d in 2007 to 36.18 million b/d in 2012, an increase of 4.88 million
b/d. 

     "OPEC spare capacity, which has steadily recovered from minimal levels at
the end of 2004 to almost 3 million b/d at mid-2007, remains relatively
constrained through to 2009, but declines sharply thereafter," the IEA said,
adding: "These effects could be magnified if the effective level of spare
capacity remains close to its historical 1 million b/d below nominal levels."

     But the IEA said that while recent history tended to justify a
"conservative approach" when calculating OPEC's "usable" spare capacity,
"there is the potential that over time some of the constraints on this
inaccessible portion could change, lifting the available reserve."