11-08-04 Global oil demand has been running much faster than previously thought over the last three years, paving the way for an oil supply crunch that has pushed prices to record highs, the International Energy Agency said.
The shift is just the latest in a series of revisions by the IEA and other analysts to correct cautious estimates of demand, which earlier this year distorted oil markets by encouraging OPEC producers to cut back supplies more than necessary.

Revisions to world demand estimates since 2002, mainly in non-OECD countries, have pushed the forecast for this year up by 750,000 bpd to 82.2 mm bpd, the IEA said in its monthly Oil Market Report.
The revisions have given a higher baseline for oil demand growth that is running at its fastest level in 24 years. The IEA left its demand growth forecasts unchanged at 2.5 mm bpd for 2004 and 1.8 mm bpd for 2005.

Strong demand growth, particularly in China and the United States has helped push oil prices to record highs, with US crude breaching $ 45 for the first time in the 21-year history of New York Mercantile Exchange futures.
The pace of consumption has caught out both analysts and producers in the OPEC cartel who early this year cut back supplies because they feared otherwise surplus inventories would build and bring down prices.

The upward demand revisions mean that the IEA has now revised up its estimate for the likely total demand, or “call” for OPEC's oil this year, by 400,000 bpd to 27.6 mm bpd. OPEC is producing more than 29 mm bpd, the IEA estimates, near its highest level for a quarter of a century and leaving it with little spare capacity to cope with any supply disruption.
The OPEC call for the fourth quarter of this year, when northern hemisphere heating demand rises, has been revised up by 600,000 bpd to 28.4 mm bpd, the IEA said. The 2005 OPEC call is up 300,000 bpd to 27.7 mm bpd, it added.

The IEA said OPEC's effective sustainable spare production capacity shrank to 600,000 bpd in July as the cartel raised output. That leaves a cushion of under 1 % on world markets, compared to about 8 % in 2002 when spare capacity was 6-7 mm bpd.
Another 1.5-2.0 mm of non-sustainable surge capacity may be available in OPEC, the IEA said.
The report said OPEC was expected to add 370,000 bpd of spare capacity by the end of this year and another 680,000 bpd by the end of 2005 as Kuwait, Nigeria, Algeria and Libya raise capacity.