By GRANT SMITH
Global oil demand will increase this year more than
previously forecast, the International Energy Agency said,
though a ban on US crude exports may crimp output growth.
World consumption will climb by 1.3 million bpd or 1.4%, to a
record 92.5 million bpd, the Paris-based IEA said Tuesday in
its Oil Market Report. The increase of 90,000 bpd
from last month follows the first year of annual demand
growth in developed nations since 2010, it said.
Meanwhile, US restrictions on oil exports may mean its
surging domestic production hits a crude wall
that curbs further expansion
, the IEA said.
Upside risks to oil demand growth are much more
relevant this year than the same period last year, where
concerns were for downside risks to materialize, said
Miswin Mahesh, an analyst at Barclays in London.
Demand- supply metrics in the oil market are moving
toward a relatively better equilibrium this year as further
North American production gets on board.
Brent crude has lost 3.6% in the past year, trading at about
$107.50/bbl in London on Tuesday, as burgeoning North
American shale output curbs imports into the US, the
worlds biggest oil user. Prices have also retreated as
a temporary agreement on Irans nuclear program eased
concern that tensions in the region could escalate and as
Libya set about restoring production curtailed by protests.
Higher forecasts for global fuel demand prompted the IEA to
increase estimates for the amount of crude needed from the
Organization of Petroleum Exporting Countries. OPECs 12
members, responsible for about 40% of global oil supplies,
will need to provide an average of 29.4 million bpd in 2014,
or about 200,000 bpd more than the IEA had forecast in last
OPECs production was about 400,000 bpd higher than the
demand for its crude in December, according to the IEA. The
groups supply rose for the first time in five months,
increasing by 310,000 bpd to 29.82 million bpd because of
higher output from Saudi Arabia, the biggest member and de
facto leader, and the United Arab Emirates. OPEC will next
meet on June 11 in Vienna.
Saudi Arabia boosted output by 75,000 bpd to 9.82 million bpd
last month, the IEA said. Production in Iran, which in
November secured some sanctions relief in exchange for
temporarily curbing its nuclear program, rose by 40,000 bpd
last month to 2.75 million bpd. Iraq was the only OPEC member
where production fell in December, declining by 25,000 bpd to
3.07 million bpd.
Laws preventing the export of crude from the US, where the
production surge last year was among the biggest for any
country in history, could have an adverse impact in
continued investment in light tight oil and thus continued
growth in production, an event the IEA refers to as the
That wall now seems to be looming larger
than ever, the agency said. The additional supply has
so far been absorbed by US refiners, who have increased
overseas sales of finished products that are not subject to
export restrictions, it said.
Global oil demand growth in 2014 will be led by China, which
will account for 28% of the 1.3 million bpd increase. The
nations consumption will expand by 369,000 bbl to 10.49
million bpd. The US was the single-biggest driver of growth
Total oil inventories in the Organization for Economic
Cooperation and Development are the furthest below their
five-year average in more than a decade, according to the
IEA. Stockpiles of crude and refined products were 99.5
million bbl below the five-year mean in November, at 2.6
billion bbl, after a plunge of 53.6 million. That was the
steepest decline since 2011.
There is hardly an inventory buffer, said Amrita
Sen, chief oil market strategist at Energy Aspects Ltd., a
consultant in London. The fact that demand increases
for much of 2013 was coming from unfamiliar territories --
the OECD -- meant that it was overlooked for many months. If
this year has any surprises in stock, they are more likely to
come from the demand side.
The agency trimmed estimates for non-OPEC supplies in 2014.
Producers, led by the US, Canada and Brazil, will raise
output this year by 1.7 million bpd to 56.4 million.
Thats 100,000 bpd less than project
ed in last months