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IEA ups oil product demand outlook
International demand out of Nigeria, Indonesia, others cited
By Steve Goldstein, MarketWatch
Last Update: 4:00 AM ET Jun 12, 2007
LONDON (MarketWatch) -- The International Energy Agency on Tuesday upped its outlook for worldwide demand of oil products, citing new data it's received from Nigeria, Indonesia and other countries, and said recent oil price strength is down to both tightness in the U.S. gasoline market as well as tighter OPEC supply.
The IEA said it's increased both its view of 2006 demand, by 250,000 barrels a day to 84.5 million barrels, and its view of 2007 demand, by 420,000 barrels a day to 86.1 million barrels.
That means that world demand is estimated to have grown 0.9% in 2006 and to rise another 2% in 2007.
Most of the upward revision comes from new data out of Nigeria, Indonesia, Singapore, Venezuela and the former Yugoslavia, the IEA said. Chinese demand actually was revised downward slightly.
Indian demand is seen climbing 4.3% in 2007 on the back of strong transportation fuel demand.
In OECD countries, demand grew 1.1% in April, led by 10.5% growth out of Korea, 4.3% growth from the U.K., 3.5% growth from Canada and 1.9% growth out of the world's top oil guzzler, the United States.
That compensated for an 8.7% drop in German demand and 7.1% drop in Japanese demand.
The IEA. said gasoline and diesel demand were particularly strong in the U.S., which it says indicated resilient economic conditions despite "anecdotal but contradictory evidence of a gradual economic slowdown and rising retail prices."
Refineries the key
The IEA said "hopes for moderation in crude prices in the short term lie both with OPEC and the U.S. gasoline market."
The energy agency said there is potential for a modest inventory rebuild if the U.S. and European refining industry can remain relatively trouble-free over the next few months. "But we remain concerned that the system is stretched," it said.
On OPEC, the IEA said crude supply from the cartel dropped by 425,000 barrels in May from April. But the cuts were largely involuntary, as Nigerian output dropped by 245,000 barrels and Iraq's output fell by 100,000 barrels a day on violence in both countries.
While there's notional spare capacity of 4 million barrels of oil a day from the OPEC countries, there's effective spare capacity of only 2.85 million barrels a day, because sizeable amounts of refinery upgrading capacity remain offline for scheduled and unscheduled maintenance, the IEA said. End of Story
Steve Goldstein is MarketWatch's London bureau chief.
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