By JENNY GROSS
The International Energy Agency on Friday raised its
forecast for oil demand for 2013, citing expectations of higher
demand from China, the world's second largest oil consumer.
In its monthly market report, the Paris-based agency raised
its 2013 demand forecast by 240,000 bpd to 90.8 million
However, the picture of strengthened global demand comes at
a time when production from the Organization of the Petroleum
Exporting Countries in December fell to its lowest level in a
year, the IEA said.
It could mean oil prices are well-supported at current levels.
Oil prices have stayed consistently high despite economic woes
in Europe and in the US.
"All of a sudden, the market looks tighter than we thought,"
said the IEA, which represents major energy-consuming
In China, which alone accounted for two-thirds of total oil
demand growth in the four years to 2011, infrastructure
spending, stronger electricity use and increased rail usage
could underpin an increase in demand, the IEA said. The report
also said robust new vehicle sales and strong demand for cheap
plastics could provide further support.
However, it cautioned that heightened debt levels and economic
uncertainties in China could lead to sharp swings in demand, in
both directions, throughout the year.
In Europe, the picture still remains bleak. The IEA projects demand from the region will
fall 1.7% in 2013 to 13.6 million bpd. This comes after
European demand, in the third quarter of 2012, saw its sharpest
quarterly contraction since the onset of the financial crisis
Non-OPEC production is forecast to rise by 1
million bpd to 54.3 million bpd in 2013, with the IEA
expecting a reduction in unplanned outages. OPEC crude supply
in December fell to its lowest level in a year as Iraq and
Saudi Arabia reduced production.
Iraqi crude production fell because of weather-related
delays in exports and a standoff between Baghdad and the
government of the Kurdish region. Production fell 235,000 bpd
to 2.4 million bpd in December.
In Saudi Arabia, production fell because of a drop in demand
due to a decline in the use of air conditioning in the country
and lower demand from refineries undergoing seasonal maintenance, the report said.
"Nothing for the global market to worry about," the report
said. "Speculation that recent lower Saudi production levels
equates to a desire for higher prices appears misplaced."
OPEC revenues are estimated to have reached peak levels in
2012 at more than $1 trillion as countries increased output and
Brent prices stayed at record levels, the IEA said.
In North Africa, energy sectors are facing hurdles. Libya's
production fell 50,000 bpd to 1.4 million bpd in December as
striking workers forced shut-in of production and amid
continuing militia attacks on oil infrastructure.
Likewise, the kidnapping of foreign workers at a gas facility
in Algeria this week and the military operation to rescue them
is casting a dark cloud over the outlook for that country's
Dow Jones Newswires