World oil demand will rise slightly more than expected in 2009, but supplies will also increase, the International Energy Agency (IEA) said on Tuesday. Demand will rise by 930,000 barrels per day (bpd) in 2009, 60,000 bpd more than previously forecast, the IEA said in its Oil Market Report for August. It cited higher European demand for the revision. Oil prices have fallen steeply from a record high of $147.27 a barrel on July 11 to about $113, pressured by evidence of slowing demand and economic growth in industrialized countries. “The basic fundamentals look easier going forward, and we're pleased to see that,” David Fyfe, an IEA analyst and acting head of its Oil Industry and Markets Division, told Reuters. But the IEA, which advises 27 industrialized countries, said it was too early to say the market had reached a turning point given recent disruptions to supply from Nigeria and Azerbaijan. Violence in Nigeria and the shutdown of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline following an explosion and fire has cut supply of high-quality crude oil by more than 1 million bpd in total. In addition, the Russia-Georgia conflict highlighted the vulnerability of energy gas pipelines crossing Georgia. Russia said on Tuesday it had ordered a halt to its military operations in Georgia. “Is this really the tipping point for the market that some pundits have identified? We would hesitate before automatically extrapolating the recent price trend,” the IEA said. China and the Middle East, where fuel subsidies are shielding consumers from high crude prices, remain the drivers of demand. High prices are curbing fuel use in Europe and the United States. “We're still seeing fairly strong growth outside the OECD,” Fyfe said. “But the underlying trends for the US in particular remain weak.” The IEA nudged up its forecast for world demand in 2009 by 70,000 bpd to 87.8 million bpd and said the outlook for 2008 was virtually unchanged. It also pointed to rising production that could indicate a more comfortable balance between demand and supply. Output from the 13-member Organization of the Petroleum Exporting Countries (OPEC) rose by 145,000 bpd in July to 32.8 million bpd, as Saudi Arabia, Nigeria and Iran all produced more oil. Supplies from Norway, Canada, Argentina and Brazil underpinned non-OPEC growth of 520,000 bpd. About three in every five barrels come from outside OPEC. The IEA lifted forecasts for non-OPEC supply by 100,000 bpd in 2008 and 2009, citing higher projections for the North Sea and United States. That counters the view of other analysts, who have predicted non-OPEC supply growth will continue to disappoint. In all, the IEA expects non-OPEC supply to reach 50.8 million bpd in 2009, up from 50.1 million bpd in 2008. The world's reliance on OPEC to meet demand will not increase next year because of higher supply from non-member countries, according to the IEA. It lowered the need for OPEC crude by 100,000 bpd for 2008. Rising OPEC supply has reduced the amount of effective unused capacity the group holds in reserve to meet jumps in demand or supply breaks to a slim 1.5 million bpd, the IEA said. But spare capacity should rise at the end of this year and into 2009, it forecasts. Oil demand is slowing sharply in advanced economies as people ease up on driving, supplies are rising and the market is set to cool well into next year, the IEA said on Tuesday. But it is too soon to declare the price boom over for now, the IEA warned, pointing to unexpected risks such as conflict in Georgia which threatened “a key energy transit hub” carrying a million barrels of oil per day. The agency noted in its monthly report that the price of oil had dropped by $30 a barrel from high points in mid July to the beginning of August. Oil fell to a three-month low on Tuesday, dropping for the third day in a row, after the International Energy Agency predicted supplies would be more adequate and Russia called a halt to the conflict in Georgia. US crude fell to a session low of $112.48 a barrel, the lowest since early May, and was trading $1.32 lower at $113.13 by 1132 GMT. London Brent crude was $1.29 lower at $111.38. Any fall from recent price peaks was welcome, IEA said, but stressed that a price of $115-120 per barrel “remains high by any measure.” The IEA said that for some months the signs had “pointed to a potential easing in (market) fundamentals for the second half of 2008 and into 2009, before renewed tightening thereafter.” But the IEA said it would “hesitate” before saying that the “tipping point” for the market had been reached. The underlying data showed that demand in the 30 advanced economies in the Organisation for Economic Cooperation and Development had eased, and the first hurricanes in the US Gulf had passed without causing damage to oil installations. The IEA said that despite a recent upward revision by the International Monetary Fund for growth of the US economy this year, arising from performance in the first half of the year, “most indicators suggest that the economy is rapidly weakening and most likely heading towards recession.” US demand for oil was likely to fall by 3.1 percent this year to 20.0 mbd and by 2.0 percent in 2009 to 19.6 mbd. In Europe, demand in the 12 months to June fell by 2.3 percent. Data suggested that demand in OECD countries in Europe would fall to an average of 15.2 mbd this year, a decline of 0.4 percent from the level last year, and also next year for a fall of 0.3 percent. It held its forecast for global demand this year steady at 86.9 mbd, an increase of 800,000 barrels per day or 0.9 percent from the level last year. It increased slightly its forecast for demand next year by 70,000 barrels per day to 87.8 mbd, an increase of 900,000 mbd or 1.1 percent from this year's level. The growth would come from outside the OECD area, the IEA forecast. “On top of slowing demand, July OPEC crude supply of 32.8 mbd was 1.0 mbd above April levels.
