Economic recovery, mainly in Asia, is set to push up oil demand by 1.4 percent a year, the IEA estimated on Wednesday, saying this would leave behind a crisis consumption dip lasting three years. But if sovereign debt crises and other drags slow down the recovery, oil demand might grow by only 1.0 percent a year and the trough in usage would last for four years, it said in a medium-term outlook for energy markets. The agency stressed that the increasingly important dynamics of growth for overall activity and therefore energy demand were blowing from emerging economies rather than from the 31 advanced OECD countries. And new ways of exploiting gas in North America were becoming critical to the energy outlook. The International Energy Agency, which is the oil policy arm of the Organization for Economic Cooperation and Development, also said that the outlook for investment in oil and gas resources was far better than it had feared at the depths of the downturn 12 months ago. “The main impact of the upstream spending dip last year was to postpone rather than cancel upstream projects, many of which have been reactivated,” it said, in response to economic recovery, strong non-OECD oil demand and higher prices. Twelve months ago, the IEA had estimated that investment in upstream resources and infrastructure might drop by 21 percent in 2009, but the fall now seemed to be 10-15 percent, and the agency said. It now estimated that investment this year would rise by 8.0-12.0 percent. “Oil and gas markets are starting to show important signs of recovery,” the agency said, but the effect of the downturn on oil and gas demand had been different. “Gas demand fell by more than 3.0 percent in 2009, double the pace of decline seen for oil,” it said, highlighting the use of oil mainly for transportation for which demand varied little. “Gas on the other hand, as a major industrial and power generation fuel, was fully exposed to the decline in industrial production seen in the recession.” The IEA said in its opening remarks: “But common to both oil and gas is the dichotomy between OECD and non-OECD markets, with continuing growth in non-OECD regions, notably China, India and the Middle East, contrasting with weaker demand in OECD and FSU (former Soviet Union) countries.” The agency said that as last year, it had drawn up two estimates for the medium-term outlook, favouring the higher estimates for economic growth and also gains in efficiency. But it warned of many uncertainties such as regulation of commodity markets, the effects on policy of the oil spill in the Gulf of Mexico, the European debt crisis, and possible overheating of the Chinese economy. In the preferred higher case based on overall economic growth of 4.5 percent per year from 2010, “oil demand grows by an average of 1.2 million barrels per day annually (growth of 1.4 percent), reaching close to 92 mbd by 2015. Oil demand recovers to pre-crisis levels again by 2010.” In the lower case, based on overall growth of 3.0 percent, growth of oil demand averaged 840,000 barrels per day (1.0 percent), taking total global demand to 90 mbd by 2015, with the reattainment of 2007 demand levels deferred to 2011.” Development of North American gas output had expanded fast “making the United States the world's largest gas producer in 2009,” the IEA said. “The development of unconventional gas in North America is of global significance. Many countries are seeking to emulate this success.” The reported said: “A number of LNG (liquefied natural gas) projects based on coal bed methane are advancing towards final investment decisions in Australia, and China may also be well placed to take advantage of unconventional gas.” US crude for August delivery on Wednesday settled down $1.50, or 1.93 percent, at $76.35 a barrel, after hitting a session low of $75.17. It was the second straight day of decline. ICE Brent crude futures for August ended down $1.77, or 2.3 percent, to $76.27 a barrel.
