London (Platts)--13Jul2007

The global oil market has the potential to be more "comfortable" in 2008
as additions to supply capacity and refining upgrades kick in, keeping pace
with continued strong demand, The International Energy Agency said Friday.
     In its latest monthly report, the Paris-based agency said global oil
product demand is expected to rise by 2.5% to 88.2 million b/d in 2008, up 
2.2 million b/d, from a revised 86 million b/d in 2007. 
     Meanwhile, non-OPEC supply in 2008 is forecast to grow by 1 million b/d
to reach 51.0 million b/d with the main growth drivers in the FSU, Latin
America, Africa and global biofuels production. 
     OPEC capacity is also expected to rise by 1 million b/d in 2008 to
average 35.4 million b/d, the IEA said, adding that that the cartel's spare
capacity will post a modest rise.
     "Overall, both in terms of spare upstream capacity and refinery
flexibility, 2008 looks at this stage to be slightly more comfortable than
2006 and 2007," the IEA said. "While product specification differences will
continue to restrict product trade, there is the potential for light and
middle distillate supply tightness to ease slightly and for the fuel oil
market to partially rebalance."
     Due to changes in its methodology, the IEA also cut its forecast of
non-OPEC supply by 400,000 b/d in the fourth quarter 2007 to 50.4 million b/d.
     The IEA said the methodology change incorporates a "field reliability"
factor to account for extreme weather, geopolitical developments and new
project delays in its non-OPEC supply estimates. The revision which mostly
affected supply estimates for OECD Europe and North America, also removes a
non-OPEC contingency factor of -0.4 million b/d from its "adjusted call on
OPEC crude and stock change", incorporating it instead in the baseline
non-OPEC forecast.
     As a result of the changes, the IEA also raised its estimate for the call
on OPEC crude by 300,000 b/d in the fourth quarter 2007 to 32.6 million b/d.
     The call on OPEC also rises by some 600,000 million b/d on average in
2008, to a midpoint of 32 million b/d, "although rising OPEC capacity levels
could prevent further tightening in spare capacity," the agency said.
     On stocks, the IEA said total OECD industry stocks built by 20.9 million
barrels in May to 2.64 billion barrels, as increased refinery throughputs and
lower seasonal demand caused product inventories to rise. 
     Preliminary end-June stock data showed a further increase of 7.8 million
barrels in the OECD, as increases in the US and Japan offset a sharp downturn
in Europe. The build implies forward demand cover for end-June at 53.6 days,
and a second-quarter stock build of 550,000 b/d, in line with the seasonal
average, the IEA said.