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IEA raises oil demand but warns on economy
Published in The Saudi Gazette on 12 - 08 - 2010

Global oil demand growth will inch higher over the rest of this year and into 2011, but any rise will be wiped out if the economy is weaker than forecast, the International Energy Agency (IEA) said on Wednesday.
Global demand for oil will exceed earlier estimates, even as the economic recovery slows next year, the Western countries energy watchdog said.
Crude demand worldwide will average 87.9 million barrels a day in 2011, the Paris-based adviser said in its monthly oil market report. While that is 50,000 barrels a day more than it forecast last month, it is less than the 80,000 upward revision for this year's estimate. There are “significant downside risks” that demand will slow on an uncertain global economic outlook, the IEA said.
“Global economic activity is seen expanding by 4.5 percent this year but remains capped at 4.3 percent next year,” according to the report. “However, concerns that the global economic recovery may falter from the second half of 2010 pose a significant downward risk to the forecast.”
The increases were slight, and the IEA said in its monthly report that they could disappear altogether if the economy falters.
“We are flagging that the signals that are coming out are pretty mixed,” said David Fyfe, head of the IEA's oil industry and markets division.
“We could lose all that (demand) growth in 2011 if GDP growth comes in about 30 percent lower than the consensus forecasts.”
“The report concurs with our view that global demand growth is slowing in the key economies, and that doesn't bode well. So the recovery is stalling, but it's unlikely that we will get a double-dip recession,” said energy strategist Sabine Schels at Bank of America Merrill Lynch.
The IEA said global oil demand would rise by 1.8 million bpd (mbpd) year-on-year to 86.6 mbpd in 2010, which was 80,000 bpd higher than the forecast in the July report from the IEA, which advises 28 industrialized countries.
For 2011, it forecast consumption would rise to 87.9 million bpd, up 1.3 million bpd year-on-year and a 50,000 bpd rise from last month's forecast, taking account of baseline adjustments.
Overall, the IEA still expects a slowdown in the pace of growth from this year to next on early signs of flatter fuel consumption in the United States and China.
The IEA August demand forecast is higher than other major estimates, even after the U.S. Energy Information Administration revised its figure up on Tuesday to 85.91 mbpd for 2010.
The Organization of the Petroleum Exporting Countries (OPEC) is expected to release its monthly report on supply and demand on Friday.
Adding to the bearish elements for the oil price, IEA revised its supply forecasts upwards by more than the hike in demand.
The organization predicted non-OPEC supply would grow by 200,000 bpd in 2010 to 52.6 mbpd and by 100,000 in 2011 to 52.9 mbpd compared with the previous month's report following an upwards US baseline adjustment and higher Chinese output in the second quarter.
Its figures for outright non-OPEC supply growth were 850,000 bpd for 2010 and 340,000 bpd for 2011 as additional supplies come on stream in countries of the former Soviet Union and in Latin America.


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