Demand to slow but oil to stay high
Energy agency predicts U.S. will have to lean harder on OPEC supplies in near future.
June 7, 2005: 5:10 PM EDT
WASHINGTON (Reuters) - Growth in world oil demand is expected to slow this year and during 2006, the U.S. government's energy forecasting agency said Tuesday, but it won't be enough to ease a tight market.
Major oil-consuming nations will have to rely more on the Organization of Petroleum Exporting Countries to supply the needed oil because non-OPEC oil production will not be able to accommodate the rate of demand growth, said the Energy Information Administration.
In its monthly forecast, the U.S. Energy Department's analytical arm lowered its estimate for world demand this year by 100,000 barrels per day (bpd) to 84.7 million, and by 200,000 to 86.7 million bpd for 2006.
That would put global oil demand growth at 2.7 percent this year and 2.4 percent for 2006, much lower than the 3.2 percent increase in oil use seen in 2004.
Average monthly U.S. oil prices are forecast to stay above $50 a barrel for rest of 2005 and for 2006, EIA said.
"Oil prices remain sensitive to any incremental oil market tightness. Imbalances (real or perceived) in light-product markets could cause light crude-oil prices to rise above $55," the agency warned.
For consumers, high crude-oil prices are expected to keep retail gas costs above $2 a gallon through 2006, EIA said.
Pump prices are expected to average $2.17 a gallon through the busy summer driving season, similar to last month's EIA projection.
Truckers will pay even higher prices for fuel, as the projected summer average cost for diesel is $2.22 a gallon, up about 45 cents from last summer, the agency said.
For the United States, the world's largest energy-consuming nation, the EIA cut average oil demand this year by 20,000 bpd to 20.84 million bpd and lowered it by a much bigger 130,000 bpd next year to 21.12 million bpd. U.S. oil use in 2004 was 20.52 million bpd.
The world will look to OPEC for the extra oil, with the cartel's production forecast to grow from an average 29.1 million bpd last year to 30.1 million bpd this year and 31 million bpd in 2006, according to the EIA.
"We're going to see continued price strength through the rest of the year because, while demand growth is slower, spare capacity remains tight," said Rick Mueller, analyst at Energy Security Analysis Inc. "Demand for OPEC crude will be high because non-OPEC producers are lagging," he said.
Demand for OPEC oil will rise this year by about 765,000 bpd, or about 2.4 percent -- higher than previous forecasts and higher than overall demand growth, according to the survey of 11 analysts.
The increase in the call on OPEC crude could potentially ease in 2006 if non-OPEC producers were able to build up output.
In its monthly oil outlook released Tuesday, the U.S. government cut its global demand growth projections for 2005 by 100,000 bpd, and for 2006 by 200,000 bpd but said the dependence on OPEC crude would grow sharply.
In 2005, world demand will grow an average of 2.2 million bpd, while production from non-OPEC nations will grow only by 700,000 bpd. Next year, world demand will grow 2.0 million bpd, with non-OPEC output seen to increase by only 800,000 bpd, the EIA report showed.
"If oil demand really grows by as much as the EIA expects, we'll see prices north of $60," said Jan Stuart, analyst at Fimat USA. "Producers will not be able to match that demand."
OPEC's president Tuesday said the organization would consider raising its production limits. Read more here. Top of page |
