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IEA Increases Forecast for Growth in Global Oil Demand in 2007

In its monthly Oil Market Report published today, the International Energy Agency (IEA) said that global oil demand in 2007 will increase at almost double last year’s pace based on increasing demand in China and the Middle East.

The IEA raised its assessment of demand growth in 2006 to 84.5 million barrels per day, and sees demand in 2007 reaching 86.0 million barrels per day. Despite a milder-than-normal start to winter, 4Q06 world demand was 1.3 million barrels per day higher than a year earlier.

China’s consumption reached 7.1 million barrels per day in 2006, and the agency now expects it to grow to 7.6 million barrels per day in 2007—an increase of 6.1% compared to its prior forecast of 5.4% growth. This lifts non-OECD demand growth to 3.6% in 2006 and 3.2% in 2007.

Total OECD industry oil inventories fell by 40.2 million barrels b in December, as the fall in crude exceeded product stock builds despite a temperate start to winter in the US and Europe. Forward demand cover fell by one day from end-November to 53 days.

January OPEC crude supply fell by 180,000 barrels per day from December to 30.2 million barrels per day. The ‘call on OPEC crude and stock change’ is revised up to 30.6 million barrels per day for 2007 versus 30.3 million barrels per day in 2006 and remains above existing OPEC production. Additional OPEC-10 supply cuts could markedly tighten the market.

Separately, the annual survey published today by the UK Offshore Operators’ Association (UKOOA) suggested that oil and gas output from the North Sea fields would be about 10% lower over the next few years than previously thought.

UKOOA said that 2006 production of oil and gas was down 9% to 2.9 million barrels of oil equivalent—the lowest level since 1992—and down from a peak of 4.5 million barrels of oil per day in 1999. Oil accounts for about 65% of the total UK production.

Comments

Rafael Seidl

Looks like we'll be back to $65 for a barrel of oil pretty soon, $80-$100 if Pres. Bush decides to attack Iran or, if the Dems force him to pull out of Iraq or, if either Nigeria or Venezuela experience serious supply disruptions or, if Russia decides to play hardball, or ...

It might be possible to leverage the enlarged strategic petroleum reserves to dampen out price spikes for a while, but those have to be replaced several months later.

The road transportation sector is the largest single consumer of crude oil in most OECD countries, along with the chemical industry and (on the US East Coast) home heating. The cost and risk of continued dependence on OPEC oil is high and, probably an even more compelling reason to improve fuel economy than global warming is.

North America still has significant local reserves of oil. In the EU, North Sea production is nearing end of life in both the UK and Norway. Japan, Korea and many other OECD countries never had much oil to begin with and neither do China or India.

Second-generation biofuels and xTL alternatives are viable but expensive substitutes that bring their own environmental issues (rainforest destruction, changing countryside, massive carbon emissions for CTL w/o sequestration etc.) We simply need to achieve similar transportation performance with less fuel or, there will be more wars over oil.

Jorge

This year is expected to be more hot than 1998; the hottest year since 1850.
I assume the people who have air conditioners will operate them at higher loads and/or during more hours per day during this year.
This can also increase the demand for oil and other energy sources.
Jorge.

Patrick

Higher A/C demand will not have that great of an impact on oil usage. Maybe a small increase from people using a/c in their cars more heavily but most people use a/c nearly every day of the year in their cars anywas (climate controls and conditioning air to take humidity out for defogging of the windows).

Household a/c demand will impact energy prices for coal, nuclear, hydro and wind more than oil.

mahonj

The key thing is to enable people to buy less powerful and more economical cars without feeling that they are losers.

The cars are there, people just won't buy them - it strikes me as a marketing problem - and a thorny one.

You could let oil go to $100 a barrel and it might happen then, but it would be better for all concerned if people reduced their consumption in advance.

Lou Grinzo

I guess we'll find out pretty quickly who's right--the IEA or Matt Simmons. Simmons said in a recent Bloomberg interview that we're at peak oil right now. If he's right (and I'm convinced it's too early to say for sure), then any increase in global oil supply beyond statistical noise won't happen.

Want to know what "interesting times" look like? Look out your window--we're there.

BlackSun

They can forecast demand growth all they want, but if the overall trend is declining supply, it's meaningless. World oil production has been close to flat since 4Q04 when it passed 84mbpd. As recently as 2Q03, it was 76mbpd. We're not likely to see further jumps on the order of 2Q03 to 4Q04 anytime soon.

See this chart:

http://en.wikipedia.org/wiki/Image:WorldOilProduction2002-2006Q2.gif

If anyone can claim this graph is not flattening out, I'd like to see their evidence.

The EIA should be taking into account supply constraints when making these types of predictions. In a constrained market, what this forecast really means is simply higher prices.

anti gravity

oil peak
oil plateau
oil decline
we may have hit the peak but we wont know for a few years yet, so we could now be in the plateau, the plateau may last a long time

Cervus

GreenFuel Tech and other algae biofuel companies are moving along with their R&D. I don't think they're moving fast enough to head off serious short-term economic problems, though. But I hope to see first commercial production of algae-based biofuels next year.

I also read not too long ago that worldwide alternative fuels production is now the equivalent of nearly 2 million barrels of oil per day. That's pretty impressive.

Just watching oil prices on a day to day basis is like a roller coaster nowadays, with wild price swings becoming more and more commonplace as the supply picture changes.

Interesting times indeed. But if there's anything that will force us to find alternatives to oil, it's peak production.

Lucas

mahonj - The reasons that people don't want to buy smaller, fuel efficient cars are many, not the least the role played by NASCAR and automobile magazines.

The amount of time and money put into brainwashing by the American automobile companies, is considerable. They plan on getting a return on their investment whether we like it or not.

critta

Let's hope for all our sakes that the plateau in oil production lasts for a long time because it buys us time to retrofit our cities for sustainable transport. Copenhagen was as car dependent as any US or Australian city 40 years ago but they made the decision to change away from car dependence. Now 36% of commuters cycle to work and a similar number use public transport. It can be done but it takes time and political will, as is illustrated by the public backlash against proposed road pricing in the UK at the moment.
We need to move quickly so we aren't caught napping when it gets to the point when $100 per barrel seems cheap.

wintermane

The number 1 reason around here going large car is your old and cant get into and out of a small car. The other reason is you dont wana die in a crash with an 18 wheeler. The final reason is most small cars dont get that much better milage but they are alot less useful and confortable and even if you can fit in and get out often they wreck your back driving in em.

Erick

I really hope OPEC keeps production low and the price of oil gets much higher... As much as I hate to pay more for fuel it seems that it's the only way we will change our ways, no amount of rational reasoning seems to affect the vast majority of car buyers and there's absolutely no political will to implement the needed taxes to shift efficiency before the actual price of crude goes up. Manufacturers are starting to see the light, but when the price goes up they better have cars we want on the lots.

Rafael Seidl

Erick -

I would expect OPEC to try and ramp up production if OECD countries actually cut consumption by more than that of non-OECD countries increases. They want a high price for their oil but no so high that they get saddled with significant excess capacity again - let alone suffer structural reductions in demand for their products.

This assumes, of course, that OPEC has a choice, i.e. that the mess in Iraq stays there and does not suck in the neighboring countries any more than it already has. That's what Bush fears most, because he knows full well he's the one who started this fire.

Harvey D.

At the current growth rate, the major fossil fuel users/importers by 2015-20 may very well be China and India, not USA. That will force world consumption + crude oil price upwards unless:

1) Alternative fuels usage increases rapidly.

2) Hybrids + PHEVs + BEVs take a much larger market share.

Since both conditions 1) & 2) will take place in many countries, crude oil price and consumption may level off sooner than expected.

wintermane

What will happen is simple as always those counyries that can afford to will get the oil those that cant will get the shaft. Also those countries that can safford to refit will be able to switch to veg oil and biofuels and gas/coal toliquids fuels.

Amaerica is lucky we have alot of cropland alot of coal alot of oil shale and alot of money.

Most arnt that lucky.

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