IEA calls for output boost

OPEC must boost oil output before the third quarter of 2007 to prevent a sharp decline in consumer nations' crude oil stocks, according to the International Energy Agency (IEA).

The IEA claim gasoline supplies in the US have sunk to a 16-year low for this time of year, citing heavy refinery maintenance and a series of unplanned disruptions as the cause.

In its May report, the IEA urged OPEC to open the taps to lower prices and refill inventories. "We see a big, 1.6 million barrel per day (bpd) crank-up in the global demand in June and there is still restraints on the refining side," said Lawrence Eagles, head of the IEA's oil industry and markets division.

Fuel inventories in OECD countries have already been drained by an unusually high 900 000 barrels per day during the past six months, said the report, coinciding with OPEC supply cuts.

"There remains a lack of upgrading capacity," added Gwyn Darling of the IEA. "This means that refined product supply cannot easily match the pattern of growth in demand. Marginal demand growth tends to be in transportation fuels, while marginal refineries tend to produce a large proportion of fuel oil. This leads to a fall in the fuel oil price."

While acknowledging constraints on gasoline, Opec ministers continue to dismiss calls to pump more crude, insisting they are supplying enough to satisfy the 85.5 million bpd oil market. But the IEA contends demand for OPEC crude will rise by up to 400 000 bpd in the third quarter because of slower output from rival producers.

"In the short term, increasing the supply of crude when there are refinery constraints will do nothing to increase the supply of gasoline," added Darling. "But it is important to ensure that crude is in place when those refineries are in a position to react."

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