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IEA Raises Oil Demand Forecast

The International Energy Agency (IEA) raised its forecast for growth in oil demand next year to 1.79 million barrels a day, an increase of 7.8% over its prior estimate. This marks the first increase in the forecast since July.

The increase would result in global oil consumption of an average 85.18 million barrels a day. In the current Oil Market Report, the IEA also estimates that global demand will continue to grow annually at an average of 1.8 to 2.0 million barrels per day (bpd) through 2010, resulting in possible strains on the supply side.

Several key non-OECD oil consumers, such as China, are in a phase of rapid energy-intensive industrialization. This should contribute to relatively robust oil product demand growth ... even if prices remain high relative to historical levels.

...In the shorter term, while an increase in OPEC capacity through to the end of 2006 is comforting, stronger growth and continuing bottlenecks elsewhere in the value chain leave little room for unpleasant surprises.

OPEC will need a strong rebound in supply growth from non-OPEC oil producers such as Russia to ensure it builds a capacity cushion. But the IEA forecasts non-OPEC supply growth in 2006 at 1.4 million bpd, up just 110,000 bpd from 2005.

This year has seen the lowest non-OPEC growth for six years amid rapid decline in the mature North Sea and near stagnant Russian output. The IEA expects non-OPEC output growth to mostly come from the Former Soviet Union (FSU), Brazil, Angola and Canadian oil sands.

For the first nine months of the year, the combined crude production from the top ten integrated oil and gas companies as ranked by Platt’s in its Top 250 Global Energy Company list dipped about 1% (about 195,000 barrels per day) to approximately 17.2 million barrels per day compared to the same period in 2004.

Those companies are, in order, ExxonMobil, Total SA, Chevron, BP, Royal Dutch Shell, ENI, Petrochina, Statoil, ConocoPhillips and Petrobras.

Performance is not even. Accordingly, some of these majors are cranking up their investment in exploration and production for 2006.

Royal Dutch Shell, with the largest decline of the group (down 7.2%, or by 159,000 barrels per day), plans to spend about $15 billion in 2006 on upstream projects ($19 billion overall), including approximately $2 billion for exploration. That marks a 27% increase in capital spending from 2005 to 2006.

BP said its capital spending for 2006 will increase to about $15 billion, up from about $14 billion this year. Chevron Corp., the second-largest U.S. oil company, plans to raise capital spending next year 35% to $14.8 billion. ConocoPhillips, the third-biggest U.S. oil company, will increase its spending 45% to $10 billion.


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