Oil demand this year to rise the most since 1988

World oil demand this year will rise the most since 1988 as economic growth accelerates and consumption surges in China, the International Energy Agency (IEA) said. Crude oil traded close to 13-year highs in London and New York. Daily use of gasoline, diesel and other fuels will rise by 1.95 mm barrels, 270,000 more than forecast last month, to 80.6 mm, the Paris-based adviser to 26 industrialized countries said in its monthly report.
The IEA's growth forecast has climbed from 1.06 mm barrels in October. "People are looking ahead to the fourth quarter now, and thinking, `is there going to be enough supply available?"' said Kevin Norrish, an analyst at Barclays Capital in London. "It's difficult to see a drop in prices."

US gasoline prices have climbed to record highs and airlines including British Airways and Qantas Airways are adding surcharges to cover fuel costs. The IEA cut its estimate of oil supply from producers outside OPEC, requiring more output from the group.
Brent crude oil for June delivery dropped 15 cents to $ 37.21 a barrel on the International Petroleum Exchange in London at 12:59 p.m. Crude oil for June was down 5 cents to $ 40.01 in electronic trading on the New York Mercantile Exchange.

Pump more
OPEC, producer of more than one-third of the world's oil, is encouraging its 11 members to increase supplies, President Purnomo Yusgiantoro said. Saudi Arabia, the world's top oil exporter, is ready to boost production after the meeting, an OPEC delegate said. Saudi oil minister Ali al-Naimi urged OPEC to boost its production quota at least 1.5 mm bpd from 23.5 mm.
"With prices at $ 40 a barrel, the market has already sent the message and has been sending the message for some time that more oil is required," said Lawrence Eagles, an IEA analyst. Supplies from non-OPEC producers will rise by 1.17 mm bpd to 50.1 mm, the IEA said, cutting its forecast by 100,000 because of lower in regions including the Gulf of Mexico and Oman.

Faster growth
This year's expected growth in world demand is the largest in absolute terms since 1988, the IEA said. In percentage terms, it matches the 2.5 % rise in 1996, before Asia's fiscal crisis curbed consumption. The Organization for Economic Cooperation and Development, a 30-member group aligned with the IEA, raised its forecast for economic growth in member-nations this year to 3.4 % from November's estimate of 3 %. Higher oil prices may damp that growth, Bank of England Governor Mervyn King said.
"Oil prices have risen sharply over the past month, reflecting world recovery, higher desired levels of inventories and political uncertainties, and represents a key risk to the near-term outlook," he said.

China last year surpassed Japan as the world's second-largest oil consumer after the US, in part because of rising car sales. Chinese demand will rise by 13.6 % this year to 6.24 mm bpd, the IEA said.
Measures by China's government to cool growth probably won't have a "significant impact on oil demand in the short term," the IEA said. China's economy expanded a more-than-expected 9.7 % in the first quarter.

Shrinking Inventories
As demand rises, fuel inventories are shrinking. Stocks of crude and fuels held by OECD nations fell by a net 280,000 bpd in the first quarter, the IEA said. Inventories in March rose by 210,000 bpd to 2.47 bn barrels, equalling 52 days of demand, up one day.
OPEC members already are pumping beyond official limits because of higher prices, the IEA said. The 10 OPEC nations outside Iraq that agree to quotas produced 25.4 mm bpd in April, 1.9 mm more than their collective target, the IEA said. Iraq's daily supply averaged 2.34 mm barrels.
The IEA raised this year's estimate of the need for oil from the group, also known as the call on OPEC, by 500,000 bpd. Demand for OPEC oil will average 26.4 mm bpd this year, the IEA said.