Global oil market balance to change little by 2010: IEA

London (Platts)--13Dec2005

World oil demand growth is likely to trend higher between 1.8-2-mil b/d
per year in the 2007-2010 period but the expected growth in global oil supply
capacity should be sufficient to cover the market's needs, the International
Energy Agency said Tuesday.
     In its latest monthly report, the Paris-based agency said demand from
India and China over the next five years will swell non-OECD oil demand but
OPEC's recovering effective spare capacity should provide a "comfort zone" of
at least 3-mil b/d by 2009.
     "The IEA's projections of global demand growth through 2010, together
with forecast evolution in non-OPEC supply and OPEC capacity are both calming
and sobering," the report said in a review of mid-term oil demand.            
     "Expectations of a higher trend in oil demand growth appear justified, as
non-OECD economies take a larger share of the world oil market. But there
appear to be enough supply-side projects to match that growth," the IEA said. 
     Looking ahead, the IEA said it expects OPEC spare capacity to recover
from a historical low of 600,000 b/d in Q4 2004 to around a "comforting"
3.1-mil b/d in Q4 2006. It said, however, OPEC's total usable, or effective,
spare capacity will only climb over 3-mil b/d in 2009.
     "The medium term outlook sees no strong evidence of a significant change
in current market conditions over the next five years," the IEA concludes.
      
     RAISES 2006 DEMAND GROWTH ESTIMATE        
     In the shorter term, the IEA cut its forecasts for global oil demand
growth in 2005 due to warm weather and hurricane-related disruptions in the
second half of the year but said demand would rebound in 2006, raising its
forecast for the next 12 months.
     OECD oil demand contracted by some 1.1-mil b/d in October due a warmer
than expected winter and the IEA revised its 2005 demand growth estimate
downward by 20,000 b/d to 1.18-mil b/d on the year. World oil demand usually
reaches an annual peak in the fourth quarter as consumers in the northern
hemisphere use more heating fuel.
     It said, however, the slowdown in the second half of 2005 is likely to be
temporary with demand growth to recover to 1.79-mil b/d in 2006, a 130,000 b/d
upward revision.
     On the supply side, the IEA said recovering US oil production from the
earlier hurricane-related disruptions, pushed world oil supply 1.3-mil b/d
higher in November to reach 85-mil b/d.
     The IEA made a cut to its forecast for non-OPEC crude supply for fourth
quarter of 2005. Non-OPEC supply during the fourth quarter of this year is now
expected to average 50.4-mil b/d, 300,000 b/d less than previously predicted.
For 2005 as a whole output is expected to average 50.2-mil b/d.
      
     CALL ON OPEC CRUDE 28.5-MIL B/D IN 2006
     OPEC production last month was estimated at 29.6-mil b/d, up 120,000 b/d
from October, with most of the increase coming from Saudi Arabia, Nigeria and
Venezuela.
     As result of counter acting revisions to 2005 oil demand and supply
forecasts, the IEA kept its estimate for the call on OPEC's oil unchanged at
29.6-mil b/d, close to the group's existing production levels. 
     Reflecting recovering global oil demand from 2006, however, the IEA
raised its call on OPEC crude for 2006 by 200,000 b/d to 28.5-mil b/d. It said
the call dips to 27-mil b/d in second quarter of 2006 but rises to 29.8-mil
b/d by end of the year.
     OPEC member countries agreed Monday to maintain the current 28-mil b/d
production ceiling ahead of a Jan 31 meeting in Vienna, but hinted strongly at
a possible cut in crude output early next year to prevent oversupply.
     On stocks, the IEA said industry oil stocks in OECD countries rose to
2.652-bil bbl in October, standing 64-mil bbl above year-ago levels. The
26-mil bbl build versus September came mainly in crude inventories, but gains
were also seen in the main product categories with distillates seasonally
increasing ahead of peak winter demand.
     Days of forward demand cover held flat from September at 52 days, one day
higher than last year.
     "Until 2009, effective spare capacity looks likely to fall short of the
3-mil b/d comfort zone in the winter months. While this represents an
improvement over the past two years, the market is likely to continue to
desire a higher level of stocks than was seen earlier this decade," the IEA
said.
--Robert Perkins, robert_perkins@platts.com

For more oil news, request a free trial to Platts Oilgram News at
http://www.platts.com/Request%20More%20Information/

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.