IEA expects oil consumption to rise faster than expected in 2004

World oil consumption will rise faster than expected this year because of China's surging economy, according to the International Energy Agency, an adviser to 26 industrialized countries.
The agency increased its forecast for growth in oil demand by 60,000 bpd to 1.7 mm bpd, the sixth consecutive monthly increase.

Consumption of fuels will drop by 2 mm bpd in the second quarter, 300,000 barrels less than expected last month, to 78.3 mm bpd, the Paris-based agency said in a monthly report.
"China's fast-rising energy consumption fuels most of the growth in global oil demand," the IEA said. "Second-quarter apparent demand may again exceed expectations, despite seasonal maintenance at several large refineries."

The increase in the demand outlook comes as OEPC plans to cut output, because of concerns a drop in demand in the second quarter may undermine prices. Crude oil in London has risen 15 % since OPEC announced the plan on Feb. 10, and closed at more than $ 33 a barrel.
While demand is rising, the IEA cut its estimate of supply from countries that don't belong to OPEC. Non-OPEC nations will increase production by 1.27 mm bpd this year, 185,000 bpd less than forecast last month. China last year surpassed Japan as the second-largest oil consumer after the US because of rising car sales and increased oil use by power generators. Chinese oil use will rise by 13 % this year to 6.20 mm bpd, the IEA said.

Fuel inventories are declining as demand accelerates. The IEA, set up as a counterweight to OPEC in 1974, has criticized OPEC's policy of managing supply, saying it is contributing to a "more fragile" market than normal.
Inventories of crude and fuels held in the 30 nations of the Organization for Economic Cooperation and Development fell by more than 1 mm bpd in February to 2.46 bn barrels, the IEA said. The decline left stocks 124 mm barrels above those of a year ago. Inventories equalled 52 days of demand, 2.5 days above 2003's level, the IEA said.

OPEC is still pumping more oil than its quota because prices are rising. The 10 OPEC nations outside of Iraq who agree to quotas produced 25.8 mm bpd in March, 2.3 mm more than their collective target as of April 1, the IEA said.
The producer group said February's cut in output reflected concern prices will drop in the second quarter, and some member-countries said the IEA's forecasts of a drop in demand in the second quarter justified the move. The IEA raised its forecasts of the need for OPEC oil, also known as the call on OPEC.

Demand for OPEC oil will drop to 24.3 mm bpd this quarter, 300,000 bpd more than expected last month, from 26.2 mm a day in the first quarter. In 2004, the call will average 25.9 mm bpd, up 100,000 barrels from last month's estimate, the report said.
Crude oil prices have been above $ 22 and $ 28 a barrel, OPEC's official target range, since December. As long as prices are high, most members aren't likely to comply with the accord to pump less oil, the IEA said.
"Cuts in actual April supply are likely to be modest, confined to perhaps Saudi Arabia, UAE and possibly Iran," the IEA said. "Cuts from elsewhere within the organization for April look elusive in the absence of any sustained drop in prices."