Global demand for oil will increase by 2.2% in 2006, up from last year’s increase of 1.3%, according to the International Energy Agency’s (IEA) January Oil Market Report.
The agency estimates that demand, driven by increasing consumption in China and the US, will average 85.1 million barrels per day, up from an average 83.3 mbpd in 2005. Demand in the US hit an all-time monthly high of 21.9 mbpd in December, growing by 1.7% compared with the same month in 2004, according to the IEA.
The IEA also cautioned that a traditional pattern of falling demand in the second quarter of a year could change this year due to changes in the oil market, including a trend in consuming countries of keeping increased levels of inventories because of supplier instability—mot recently Iran and Nigeria.
Oil prices rose above $65 a barrel on Tuesday in New York on concern over militants in Nigeria and a standoff with Iran over its nuclear policy. Iran and Nigeria contributed about 8.2% of the global oil supply in 2004, according to the BP Statistical Review of Energy.
The IEA noted that global oil supply reached 85.0 mbpd in December, up by 0.6 mbpd from November. The agency revised down its estimates of non-OPEC supply for 2005 by 90 kbpd on weak OECD output to 50.1 mb/d, unchanged from 2004. Non-OPEC growth is projected to accelerate to 1.3 mbpd in 2006.
OPEC crude supply declined 280 kbpd in December to 29.3 mbpd. Iraqi supply fell to 1.55 mbpd from November’s 1.7 mb/d and Nigerian production was also disrupted in December and January by militant action.
The IEA assesses OPEC spare capacity as remaining tight (less than 1.5 mbpd), but sees installed capacity rising by 1.0 mbpd in 2006. The call on OPEC (the OPEC oil required to meet global demand) for 2006 is revised up by 0.1 mb/d to 28.6 mb/d, an increase of 0.2 mb/d versus 2005.