IEA Raises Oil Forecast to the Second biggest increase in 30 yrs.

IEA raises forecast for global oil demand

ByJavier Blas, Commodities Editor

Published: December 10 2010 09:53 | Last updated: December 10 2010 09:53

Global oil demand will grow more this year than previously expected, the International Energy Agency said on Friday, putting pressure on the Opec oil cartel to boost supplies and stop prices from hitting $100 a barrel.

The western countries’ oil watchdog said that “against a backdrop of much-stronger-than-expected global oil demand”, Opec “may come under pressure to increase supplies to the market in the new year if prices continue their relentless rise”.

Opec meets on Saturday on Quito, Ecuador, to discuss its production policy. The warning is the first clear indication that after two years restraining output to avoid a decline in oil prices during the global financial crisis, the cartel’s next job will be to decide when to open the spigots and by how much to control rising oil prices.

The IEA revised upwards its estimate for global oil demand for this year and 2011 on the back of stronger-than-expected demand in North America and China.

The Paris-based agency forecast consumption rising this year by 2.5m barrels a day, the second-highest annual increase in at least 30 years, and about 130,000 b/d more than the figure given in last month’s update. For 2011, the IEA forecast oil demand would rise by 1.3m b/d, or about 260,000 b/d above its previous forecast.

“Although economic concerns remain skewed to the downside – not least if current high prices begin to act as a drag on growth –, more immediately demand could surprise to the upside,” the IEA said in its monthly editorial comment. “Recent harsh northern hemisphere weather, allied to electric power rationing in China, if sustained, could push short-term demand higher and tighten market balances further,” it added.