Global oil demand will hit a record high this year, the International Energy Agency (IEA) said on Tuesday, revising up consumption estimates as the world economy recovers from recession.
The Paris-based adviser to industrialized economies raised its forecast for world oil demand growth this year to 1.67 million barrels per day (bpd), up 100,000 bpd.
The agency said in its monthly Oil Market Report that world oil demand would reach an average of 86.60 million bpd this year, up from 84.93 million in 2009.
The previous record high for world oil demand was 86.5 million bpd in 2007 before the onset of the global financial crisis and economic slowdown.
There are signs of oil demand picking up in North America and the Pacific, Asia and the Middle East although consumption in Europe still looks weak, David Fyfe, head of the IEA's Oil Industry and Markets Division, told Reuters.
But the extra demand will largely be met by production from outside the Organization of the Petroleum Exporting Countries.
The IEA raised its forecast for non-OPEC output in 2010 by 220,000 bpd to around 52.0 million bpd due to higher output by OECD countries. Overall, non-OPEC supply is expected to rise by around 500,000 bpd this year.
As a result, the IEA estimated demand this year for OPEC crude and stocks would fall by 200,000 bpd to 29.1 million bpd.
OPEC COMPLIANCE FALLS
Oil prices were largely steady after the IEA report, with benchmark U.S. crude oil futures for May trading around $83.63 per barrel, down 71 cents, by 6:06 a.m. ET.
The IEA noted that oil prices, which hit an 18-month high above $87 last week, had risen above the range of $60 to $80 per barrel that OPEC and many industrialized countries see as ideal for producers and consumers.
It said oil prices could stifle world economic growth if they were allowed to rise too far.
Ultimately, things might turn messy for producers if $80-$100 per barrel is merely seen as the new $60-$80, stunting economic recovery while prompting resurgent non-oil and non-OPEC supply investment, the IEA report said.
Total OPEC production declined in March, the IEA said, but this was largely due to a fall in production by Iraq, which is not bound by OPEC output targets.
It said production by the 11 OPEC countries bound by OPEC output targets rose by 30,000 bpd, taking their compliance as a group with promised output cuts to around 55 percent at the end of March, down from its previous estimate of 56 percent at the end of February.
Oil stocks in industrialized countries that are members of the Organization for Economic Cooperation and Development (OECD) rose to around 60 days of forward demand at the end of February from about 59.5 days at the end of January, the IEA said.
The IEA said refineries around the world would process nearly 1 million bpd more oil in the second quarter than in the same period last year with China and Asian countries raising output most. This is up 300,000 bpd over the last estimate.
The return of economic growth and hence oil demand growth is fuelling the increase, the report said.
China's refinery output will jump by 900,000 bpd from a year ago, helping to offset a fall of 440,000 bpd in OECD countries.
(Additional reporting by David Sheppard)