London (Platts)--10Jul2009

The International Energy Agency predicted Friday that world oil demand
would rebound to 85.18 million b/d in 2010, up 1.42 million b/d or 1.7% from
this year's average level of 83.76 million b/d.

The expected increase in demand marks a recovery from this year, when
consumption is poised to witness its biggest drop since 1981.

The IEA said in its latest monthly oil market report that the prediction
of an upturn in oil demand was based on IMF assumptions of global economic
growth of 1.8% in 2010.

Earlier this week the IMF issued a more optimistic forecast, revising the
2010 growth estimate to 2.5%, but this was published too late for the IEA to
be able to factor it into its oil demand projections.

If economic growth turns out to be weaker than expected, oil demand in
2010 could be around 300,000 b/d less than the predicted level, the IEA said.

"It's very dependent on the shape of the economic recovery. If it's a
W-shaped recovery rather than a V-shape, you could get different answers,"
David Fyfe, head of the IEA's oil markets division and editor of the report,
told Platts.

The IEA's projections show most of the rise in demand next year coming
from non-OECD countries, but it also expects a modest increase in oil
consumption in the OECD, after several years of declines.

China is expected to account for a large part of the increase, with its
oil use expected to rise by 4.1% from 7.98 million b/d in 2009 to 8.31 million
b/d in 2010.

Elsewhere, the strongest growth is seen coming from the Middle East,
where total oil demand should rise from 7.24 million b/d in 2009 to 7.57
million b/d in 2010.

BIG JUMP IN OPEC NGL OUTPUT

The growth in demand is not expected to translate into a similar increase
in demand for OPEC crude, as most of the increased consumption will be met by
a surge in gas liquids output by OPEC and higher non-OPEC supply.

Oil production by countries outside OPEC is expected to grow to 51.2
million b/d in 2010, up 400,000 b/d or 8% from 50.8 million b/d this year.

Strong growth in Azerbaijan, Brazil, the US Gulf of Mexico, Canadian oil
sands and from global biofuels is expected to outweigh declining production
from the UK, Norway and Mexico, the IEA said.

Only 50,000 b/d of the non-OPEC increase next year comes from
conventional crude output, compared with an expected 190,000 b/d jump in
biofuels supply and 260,000 b/d more non-conventional supply, including
natural gas liquids.

The IEA expects substantial growth in OPEC's production of natural gas
liquids, which is seen rising by 900,000 b/d from this year's level of 5.2
million b/d to reach 6.1 million b/d in 2010.

Major additions in NGL supply, which is not counted as part of OPEC
member countries' crude supply quotas, are seen coming from Iran, Nigeria,
Qatar, Saudi Arabia and the UAE, the IEA report said.

After taking OPEC NGL output and non-OPEC supply away from next year's
expected demand, the resulting "call" on OPEC crude is expected to rise to
27.9 million b/d in 2010, up 200,000 b/d from this year's 27.7 million b/d.

The IEA also revised its estimates for this year, raising the 2009
non-OPEC supply estimate by 300,000 b/d to 50.8 million b/d.

RUSSIAN OUTPUT HIGHER THAN EXPECTED

As a result of the change, the IEA now says non-OPEC supply in 2009 will
rise by 190,000 b/d from last year's average level, compared with its previous
expectation of a 100,000 b/d fall in output.

The revisions to this year's estimates stem from stronger-than-expected
production in Russia, a recovery at the ACG fields in Azerbaijan and
"relatively robust" volumes from the US and North Sea.

OPEC production also edged up to 28.68 million b/d in June, up 70,000 b/d
from May's average level of 28.61 million b/d and well above the estimated
call on OPEC, the IEA said.

Production from the 11 OPEC members bound by quotas, not including Iraq,
rose to 26.18 million b/d in June, up 60,000 b/d from 26.12 million b/d in
May, the IEA said in its latest monthly oil market report.

The rise in OPEC-11 output came despite an 80,000 b/d fall in Nigerian
supply to 1.72 million b/d due to attacks on oil infrastructure in the Niger
Delta.

The lower Nigerian supply was more than outweighed by higher production
from Angola, Iran and Qatar, the IEA said, adding that the increase in oil
prices in recent months "appears to have weakened the resolve of some members
to adhere closely to output target cuts."

The IEA's estimate of OPEC-11 supply was 1.335 million b/d above their
combined target level of 24.845 million b/d, meaning that compliance with
pledged output cuts totaling 4.2 million b/d fell to around 68% in June from
69% in May.
--Richard Swann, richard_swann@platts.com