Demand for oil this year will be higher than expected because of cold weather, expected robust growth in the US and consumption in China, the International Energy Agency forecast today.
The agency raised its estimate for global oil demand in 2005 by 330,000 barrels a day to 84.3 million barrels a day.
It also revised upwards its estimate of global demand for oil from OPEC this year by 200,000 barrels a day to 28.6 million barrels. This was half a million barrels more than the 2004 global demand figure of 28.1 million barrels.
'The revision is most pronounced in the first half of 2005, before higher non-OPEC output takes effect,' the report said. But it also said that in February world supply had surged by 885,000 barrels a day to 84.3 million barrels.
The IEA, the energy monitoring arm of the OECD, published its monthly report against a background of a recent surge in oil prices and concern that the market is set to be tight for some time, and even years.
There is a growing belief that high oil prices could increase the risk of inflationary pressures and therefore vigilance by central banks about any need to increase interest rates.
'Cold weather in the northern hemisphere has caused a surge in demand. Heating fuel prices have tightened globally, but more significantly in Europe and Asia,' the agency said.
'The reality is that oil consumption has caught up with crude and refining capacity. If supply continues to keep up, more policy attention may come to be directed at oil demand intensity in our economies and alternatives,' it said.
'Recent reports indicate that the US economy is more likely to carry the momentum that has built in the latter part of 2004 into the first half of 2005. On the whole, US demand growth is revised upwards by 120,000 barrels per day,' the report added.
'China's demand growth has been revised upwards by 100,000 barrels per day,' the IEA said, arguing that one reason why oil demand remained high despite high prices was that high oil prices were pushing labour-intensive activities to areas where labour costs were low. But this involved transportation costs.
Although the growth of demand for oil by China was expected to slow in 2005 from the rate of growth in 2004, strength of the US economy had caused the IEA to increase its estimate of Chinese demand growth by 100,000 barrels per day in 2005.
