Tension between Iran and the West is likely to keep oil prices high despite a dramatic improvement in world supply and a big build in stocks, the International Energy Agency (IEA) said Friday in its monthly Oil Market Report, adding that uncertainty remained. The agency, which advises 28 industrialized nations on energy policy, said soaring global oil supply from OPEC countries and the US far outpaced global demand, curbed by poor economic activity in developed nations. The agency said global oil supply rose 600,000 barrels per day (bpd) to 91 million bpd in April and was now 3.9 million bpd over year ago levels, with 90 percent of the increase coming from OPEC. Oil prices dropped Friday as traders worried about disappointing Chinese economic data and debt-wracked Greece, where an election was almost certain after austerity opponents blocked a new government. New York's main contract, West Texas Intermediate crude for delivery in June, shed 95 cents from Thursday to close at $96.13 a barrel. Brent North Sea crude for June settled at $112.26 a barrel, down 47 cents in London trade. “The week we had for crude has been just distinctly bearish,” said Matt Smith at Summit Energy. Greece's socialist leader admitted Friday he had failed in a last-ditch bid to form a government, taking the nation a step closer to repeat elections as it faces increased European Union pressure over its finances. Crude has slumped about 10 percent from $106 last week as traders mull signs the economies of the US, Europe and China are slowing. Analysts are also eyeing rising US crude inventories, which rose last week to a 22-year high while OPEC, led by Saudi Arabia, increased oil production by 320,000 barrels per day in April, according to Platts, the energy-information arm of McGraw-Hill Cos. “The energy market is vulnerable to additional negative guidance from the US economy, a slowing in the Chinese economic growth engine and a renewed heightening in European debt worries,” energy trader and consultant Ritterbusch and Associates said in a report. Moreover, the IEA said oil demand from emerging countries this year will offset lower consumption by advanced economies in the OECD. It said global demand growth would gradually accelerate throughout 2012 from close to zero growth in the first quarter to an expansion of 1.2 million barrels per day by the fourth quarter. "Global oil consumption is set to rise by 0.8 million barrels per day in 2012, to 90.0 mbd, with gains in the non-OECD more than offsetting declining OECD demand," the IEA said. The modest upside revision is attributable to marginally improved economic growth numbers provided by the International Monetary Fund, the agency said. "The world's four biggest markets - China, the US, Europe and Japan - should dominate the demand story in 2012," the IEA said. Chinese demand growth is forecast to maintain its global dominance in 2012, at 0.4 mbd to 9.9 mbd or almost half of the total expansion worldwide. But big declines are foreseen in Europe, down by 0.3 mbd to 13.9 mbd, and the US, down 0.2 mbd to 18.7 mbd. Japan, where the economy is recovering from last year's earthquake and tsunami disaster, is expected to buck the OECD trend with demand rising 40,000 barrels per day to 4.5 mbd, buoyed by the country's decision to phase out nuclear energy. Global oil supply in April increased by 0.6 mbd to 91.0 mbd, the IEA said, with OPEC crude production accounting for more than 70 percent of the increase.
