IEA sees global oil demand bouncing back in 2010

OIL TURMOIL: Oil has been extremely volatile over the last year. (Getty Images)

Global oil demand will rebound 1.7 percent next year, led by rising consumption in emerging economies as the developed world recovers from recession, the International Energy Agency said on Friday.

But the IEA, adviser to 28 industrialised economies, still predicted demand would shrink this year and said the need for OPEC oil would be limited.

It forecast world oil consumption next year would reach 85.2 million barrels per day (bpd), up from 83.8 million this year. The demand outlook for this year was "effectively unchanged" -- down 2.9 percent, or 2.5 million bpd compared with last year.

David Fyfe, head of the IEA's oil industry and market division, said the extent of recovery in world oil demand would rest on the performance of the global economy and prices.

"It's highly dependent on economic recovery materialising and the expectation (oil) prices will remain in a relatively moderate range," he said.

He said a small upward revision in the estimate for oil demand "should not be interpreted as green shoots".

The 11 members of the Organization of the Petroleum Exporting Countries subject to output curbs pumped 75,000 bpd more in June, compared with the previous month -- taking their compliance with promised cuts down to 68 percent from a revised estimate of around 69 percent in May.

The latest Reuters survey pegged OPEC compliance at 72 percent. [OPEC/O]

OPEC members have promised to reduce their oil output by 4.2 million bpd from the level they produced last September in response to a sharp decline in oil demand triggered by the global economic downturn.

But as oil prices have risen, several OPEC members have begun to produce more oil than their implied output quotas.

Oil has been extremely volatile over the last year, peaking at an all-time record of more than $147 per barrel a year ago, plunging to below $40 in December and then recovering to more than $70 in June.

By 3.10pm UAE time on Friday, benchmark US light crude oil was trading around $59.60 per barrel, down 81 cents on the day. Prices rose slightly following the IEA report, but then resumed their slide as the market focused on economic weakness.

The IEA said demand for OPEC crude was expected to remain limited following a 330,000 bpd upward revision to non-OPEC supply, mostly because of higher-than-expected Russian output.

It saw demand for OPEC crude in 2009 at 27.7 million bpd and said it would edge up only slightly to 27.9 million bpd in 2010.

This echoes OPEC's own view. The producer group said this week that world demand for its oil would not recover to levels seen before the global economic slump until 2013.

"Potentially, there is not an awful lot there for OPEC," said Fyfe.

The IEA said oil inventories had increased worldwide in May, particularly in North America, Europe and the Pacific, taking stocks to the equivalent of 62.5 days of forward cover at the end of May, 7.2 days more than a year ago and up from 62 days at the end of April. (Reuters)

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