IEA: Demand Growth Continues, Non-OPEC Supply Growth Falters
11 August 2005
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| Crude prices have increased some 18% since March. |
In its current Oil Market Report, the International Energy Agency increased its estimate of growth in OPEC oil production by 250 thousand barrels per day (kbpd). But the agency then cut its view of non-OPEC supply growth by 205 kbpd, leaving world oil supply at 84.7 million barrels per day (mbpd).
Production outages in North America and the North Sea accounted for most of the shortfall in non-OPEC supply growth. Russia is also pumping less than expected. Furthermore, the IEA cut its non-OPEC production estimate for 2006 by 400 kbpd to 52 mbpd.
The decrease in non-OPEC supply clearly puts more pressure on OPEC—and specifically, Saudi Arabia—to meet demand that continues to grow at a steady pace.
Despite some revisions in historical data, the IEA maintained its estimate for growth in oil demand in 2005 at 1.6 mbpd (approximately 2%), and nudged it slightly upward to 1.78 mbpd in 2006 from last month’s estimate of 1.75 mbpd. The continuing rise in prices, in other words, has not significantly affected global demand.
Benchmark oil prices climbed above $65 per barrel in response to the news about non-OPEC production, decreasing gasoline inventories in the US, and concern over future OPEC production.
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| Gasoline demand is up 3% year-on-year. |
In the meantime, gasoline demand in the US continues to grow, according to the EIA, despite ever-increasing prices. For the four weeks ending on 5 Aug 2005, US drivers consumed an average 9.483 million gallons of gasoline per day— up 3% year-on-year from 9.221 million gallons per day.
Diesel demand continues to grow as well, increasing 2% to an average 4.006 million gallons per day up from 3.930 million gallons per day.
Gasoline demand grows, but are miles driven increasing? Or, is the fleet composition becoming increasingly SUV-like?
Posted by: JN | 11 August 2005 at 09:13 AM
Good question JN, very good question.
Posted by: Scott | 11 August 2005 at 10:36 AM
The price will pass $80 in 2006 and fluctuate between $80 and $100 for some time; at those prices it limits itself by stalling economic growth, until technology improvements and social change allow significant reductions in demand.
Posted by: richard schumacher | 11 August 2005 at 11:24 AM
Well, it’s too soon to get VMT (vehicle miles travelled) data for the last weeks, but we can make some guesses.
Given that the number of new vehicles purchased since last year is still a relatively small percentage of the total vehicle fleet (about 7%), given that the EPA estimates that fuel economy for 2005 models is essentially flat with last year, and given that the purchase mix hasn’t changed dramatically from last year (aside from a noteable drop-off in full-size SUV and some truck sales prior to the mega-discounting of the past few months), I’s guess that the bulk of that increase in gasoline demand comes from driving more miles.
But it will be interesting to apply actual VMT data to the consumption question. :-)
Posted by: Mike | 11 August 2005 at 12:04 PM