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Reuters reported that the West’s energy watchdog the IEA upped the pressure on producer club OPEC to increase output by forecasting a steep rise in oil demand later this year and predicting the strain on supply would last over the medium term.
Oil prices rose in response to the latest sets of numbers from the International Energy Agency. Brent crude hit a session high of nearly USD 115 per barrel up almost USD 2.
The Paris based adviser to 28 consumer countries raised its assessment of how much OPEC oil would be needed this year by 400,000 barrels per day to 30.1 million barrels per day in a monthly report.
Data from the Organisation of the Petroleum Exporting Countries has also indicated a need for more oil in the H2 of this year. But the group failed to agree on an output increase at a meeting in Vienna last week and its secretary general took exception to public comment from the IEA, which has said it would release oil from emergency reserves if necessary.
Mr Abdullah al Badri secretary general of OPEC said that “Strategic reserves should be kept for their purpose and not used as a weapon against OPEC. In a five yearly forecast issued in parallel with its monthly update, the IEA made the assumption Libyan output would not return to pre war levels until 2014.”
Mr David Fyfe head of the IEA’s Oil Industry and Markets Division said that “We have lost 1.5 million barrels per day of capacity from Libya, baseline demand is higher and spare capacity has been eaten into. I think the market from 2010 through 2012 is looking tighter than we were thinking 6 months ago.”
The IEA raised its five year global oil demand forecast by an average of 700,000 barrels per day compared with the previous medium term report issued in December. A tightening supply demand balance on the oil market meant the bull run since late 2010 was largely justified by fundamentals. Levels of speculative activity were lower than in 2008 when the oil market vaulted to its all time high of more than USD 147 a barrel for US crude.
So far this year, prices for Brent have peaked at just above USD 127 per barrel. The rally has inspired investment, especially in non OPEC countries, whereas OPEC expansion plans have been stalled due to a lack of investment and project delays. Overall oil supply should increase from 93.8 million barrels per day to 100.6 million barrels per day by 2016, a net rise averaging 1.1 million barrels per day annually but slower than the average demand growth of 1.2 million barrels per day.
