By Richard Swann on February 11, 2010 6:21 AM

The outlook for oil demand is becoming increasingly positive, but that is not likely to translate into good news for refiners for several months at least, according to the latest prognosis for world oil markets from the International Energy Agency.

Revising its numbers on the basis of rosier economic projections from the International Monetary Fund, the IEA's latest monthly report released February 11 shows it has raised its estimate of world oil demand in 2010 by 170,000 b/d. The Paris-based agency now expects global oil demand to average 86.5 million b/d in 2010, up 1.8% from last year's estimated 84.94 million b/d.

There is not expected to be any growth in consumption from OECD countries--not even for heating oil during the current cold spell--but the IEA does expect to see consumption from non-OECD countries rise to 41.02 million b/d this year from 39.45 million b/d in 2009.

Demand in China, the world's second-biggest oil consumer after the US, is expected to rise by 400,000 b/d this year to reach 8.9 million b/d, leaving it only 90,000 b/d short of the combined total of the five biggest oil users in Europe--France, Germany, Italy, Spain and the UK.

As well as in China, oil demand growth is expected to be relatively strong this year in the Middle East (up 4.5% to 7.55 million b/d), and the Former Soviet Union (up 4.4% to 4.06 million b/d), the IEA said.

But this demand is not expected to have any immediate impact on low refining margins, with the IEA warning that surplus global refining capacity looks set to remain substantial for months to come.

This surplus could reach 3.4 million b/d by the fourth quarter of this year, assuming an average utilization rate of 84%, and could linger at around this level throughout 2011.

With new refineries due on line in places like India, China and the Middle East, the IEA repeated its prediction that more capacity is likely to be shut in OECD countries.



OPEC NGL BOOM

The IEA also gave a rare, detailed look at its estimates of OPEC natural gas liquids production, one of the fastest-growing parts of the oil industry in recent years but one which rarely attracts much scrutiny.

Although the IEA's estimate of OPEC NGL production in 2010 was cut by 300,000 b/d, it is still expecting year-on-year growth of more than 800,000 b/d.

The breakdown of the headline numbers showed Saudi Arabia as the biggest producer, with output expected to climb to 1.56 million b/d this year from 1.394 million b/d in 2009.

But perhaps more interesting is the case of the second-biggest NGL producer in OPEC, gas-rich Qatar. According to the IEA, Qatar's NGL supply is poised to grow to 1.01 million b/d in 2010 from 721,000 b/d in 2009, which would see it become OPEC's first member to produce more gas liquids than crude oil.