Global oil demand will be almost 0.5 million barrels per day (bpd) higher than previously forecast this year and next on stronger-than-expected U.S. and Chinese fuel consumption, the International Energy Agency said.
The IEA, adviser to 28 industrialized economies, said on Thursday world oil consumption would average 84.4 million bpd in 2009 -- down 2.2 percent from 2008 due to the economic downturn.
But it said in its monthly Oil Market Report that demand would rally next year, rising 1.3 million bpd, or more than 1.5 percent, as recovery takes hold.
David Fyfe, head of the IEA's oil industry and market division, said oil consumption would pick up again toward the end of this year after a period of extreme weakness, especially in the large, developed economies.
The year-on-year decline will diminish as we go through the end of 2009, and then from early 2010, we will begin to see year-on-year growth in global demand, Fyfe said.
The IEA report said the upward revisions in estimates of oil demand were largely due to the largest consumers -- the United States and China -- but said developing economies were likely to account for virtually all of next year's rise in global demand.
It forecast oil refineries would process more crude oil worldwide in the fourth quarter of this year than in the same period of 2008, the first annual increase in more than a year.
The Organization of the Petroleum Exporting Countries met in Vienna on Wednesday and agreed to keep its oil production unchanged, with the 11 OPEC members subject to curbs aiming to maintain output at 4.2 million bpd below their September 2008 production levels.
OPEC oil output has increased this year, despite promises to restrain production, and the IEA said the group pumped 55,000 bpd more in August than in July, taking OPEC-11 compliance with promised cuts down to 66 percent from 68 percent in July.
The IEA estimated total OPEC supply at 28.81 million bpd in August. It kept its estimates of non-OPEC oil supply unchanged at 51 million bpd for 2009 and at 51.5 million bpd for 2010.
Oil prices have rallied strongly this year with investors focusing more on the prospect of economic recovery and rising stock markets than on the immediate supply and demand fundamentals of the oil market, analysts say.
Benchmark U.S. light crude oil futures were up 60 cents per barrel at $71.91 by 5:40 a.m. EDT on Thursday, more than double the 2009 low of $32.70 reached in January.
Harry Tchilinguirian, oil analyst at BNP Paribas, said the IEA report confirmed the consensus in the oil market.
The bottom line is that we are seeing a contraction of more than 2 percent in consumption this year, but demand will recover as we get positive economic growth in 2010, he said.
The IEA said oil stocks in the big developed countries of the OECD were unchanged at the equivalent of 61.8 days of demand at the end of July, 4.6 percent higher than a year ago.
Fyfe said this level of stock cover was unusually high but had to be seen in the context of the deep economic downturn.
It is a slightly misleading measure when you are in such an exceptional global economic recession situation.
The IEA said the supply of middle distillates such as heating oil and diesel was high and future oil price direction would hinge partly on how long this persisted.
There is quite frankly an overhang of middle distillate, which partly brings into question the durability of the industrial turnaround, he said, noting that use of these products correlated fairly closely with economic activity.
That says to us that certainly in the OECD countries, economic turnaround is muted at best.
(Editing by Anthony Barker)