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IEA Increases Oil Demand Growth Forecast for Second Half of 2005

In its current Oil Market Report released today, the IEA kept its estimate of demand growth for the full year at the 84.3 million barrels per day (mbpd) forecast last month.

However, the agency raised its estimate of global demand in the second half of year, increasing to 86.4 million barrels per day in the fourth quarter—up 200,000 barrels (200 kbpd) from the estimate a month ago. The agency revised down its estimate of demand growth for the second quarter due to greater slowing of Chinese demand than seen last month.

To meet the year-end increase in demand, OPEC would have to pump 29.6 mbpd in the last months of year, 300 kbpd a day more than predicted last month. This level of output, however, is less than last year’s Q4 call on OPEC of 29.8 mbpd.

The IEA cites continued slowing of demand growth in China and Europe, but notes that this is counterbalanced by relative strength in North America and the OECD Pacific.

World oil output rose by 260 kbpd per day in May to 84.6 mbpd. This resulted from higher Venezuelan syncrude output and increases from the FSU, Asia and North America.

Iea_may05_supplydemand Iea_may05_thegap

Comments

stomv

Any chance we could see the above charts quarterly (instead of monthly) dating back to an earlier time... just to see exactly how the S and D curves have been converging. Throwing in the average price of gasoline on that same chart (somehow?!) might be interesting too...


Thanks! Great blog... it would be nice to see more comments, but I'm sure you've got a large readership nonetheless.

julio

i agree with stomy. that would be an interesting chart

Mike

I can do that, although that particular approach isn’t going to be that revealing. If you chart actual production and consumption for the past forty years, you’ll see they are pretty closely matched most of the time.

Producers don’t want to have a lot of extra crude sitting around; conversely, you can’t consume what’s not produced.

One of the differences in the market now that would be difficult to capture in the chart we’re talking about is that the excess capacity to meet increasing demand or to offset some sort of shock to the system (e.g., terrorism, hurricanes, political unrest, crumbling infrastructure) is shrinking scarily.

OPEC, and specifically Saudi Arabia, is generally seen as the swing producer of last resort (as the US used to be decades ago). But OPEC, at least according to some statements made, is flat out.

It’s in that context that the steadily increasing forecasts of increasing demand push the price up on the market...it’s in anticipation of NOT being able to meet that increase.

So what we want to look at is supply, demand, excess production capacity, the price of crude (segmented) and the gasoline prices...and I'm not sure I can get good data on the excess production capacity. (The whole area of accounting for reserves and production capacity...and even historical production and consumption...is more than a bit fuzzy.)

But let me look around and see what I can do.

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