IEA Increases Its Global Oil Demand Forecast for 2009

By Grant Smith

Aug. 12 (Bloomberg) -- The International Energy Agency, an adviser to 27 nations, raised its forecast for global oil demand next year and said it expects Chinese oil consumption to rise after the Olympic Games.

The IEA increased its forecast by 70,000 barrels to 87.8 million barrels a day, the Paris-based agency said today in its monthly report. Last week's pipeline explosion in Turkey may cut output from Azerbaijan by 30 percent this quarter and supplies are further threatened by military action in Georgia.

``We're still looking at a pretty buoyant picture in 2008, 2009 in China,'' David Fyfe, the IEA's supply analyst, said in a telephone interview. ``We are seeing a two-tiered market'' with emerging economies surging and developed markets flagging.

Chinese oil demand is expected to increase 5.7 percent next year as consumers in the world's fastest-growing major economy spend more on travel. ``Minor revisions'' to global growth forecasts, and expectations for rebuilding of depleted heating oil inventories in Germany also contributed to adjustments to world demand, the IEA said.

``Recent trends in Chinese crude runs suggest a possibility of stronger than expected demand, pre-Olympic stockpiling or both,'' the report said. Chinese demand ``will likely rebound'' with the lifting of measures to curb pollution during the Olympics, it said.

Unchanged

Oil traded in New York reached a record $147.27 a barrel on July 11. Oil for September delivery was at $113.60 a barrel as of 11:59 a.m. London time today on the New York Mercantile Exchange.

The agency projects demand growth for 2009 at 1.1 percent, from 1 percent last month, while the rate for this year remains unchanged at 0.9 percent.

The Chinese government had closed oil refineries and coal- fired power stations and reduced vehicle traffic before the Olympic Games to improve air quality. Fuel use will likely recover when these facilities are reopened after the event, the IEA said.

The country's demand trends for the second half of the year remain ``remarkably opaque,'' the report said. Once the games finish refiners may curb imports, or the government may raise fuel costs for consumers. Alternatively the return of one million cars removed from Beijing's roads during the tournament may bolster demand, the IEA said.

Supply Forecast

Oil has retreated 22 percent from a record after swelling fuel costs prompted motorists to drive less and airlines to scale back routes. Emerging economies from China and India to Indonesia are raising prices to rein in use of subsidized fuels.

The IEA also boosted its projections for supply from outside the Organization of Petroleum Exporting Countries by about 100,000 barrels a day this year, and next, on an improved outlook for North Sea and U.S. projects. Non-OPEC suppliers will provide 50.1 million barrels a day this year and 50.8 million in 2009.

The agency lowered its estimate for Azeri crude oil and natural gas liquid extraction by 255,000 barrels to 860,000 barrels a day in the third quarter. The nation's 2008 output was cut by 55,000 barrels a day to 1.02 million barrels.

OPEC, which supplies more than 40 percent of the world's oil, will need to provide about 31.6 million barrels a day this year to balance world supply and demand, the report showed. That's about 100,000 barrels a day less than it estimated last month. The IEA left its estimate for next year's so-called ``call on OPEC crude'' unchanged at 31.1 million barrels a day.

Saudi Arabia, the biggest producer in OPEC, has agreed twice this year to increase its own daily production in an attempt to curb the rise in oil prices. The group pumped 32.8 million barrels a day last month, 145,000 barrels a day more than in June, according to IEA estimates.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net