Oil demand will be higher in 2014 than previously estimated as global economic growth recovers, the International Energy Agency said. Pressure on supplies will ease in coming months as seasonal consumption dips.
World consumption will increase by 1.4 million barrels a day, or 1.5 percent, this year to a record 92.7 million a day, or about 95,000 a day more than forecast last month, according to the IEA, a Paris-based adviser to oil-consuming nations. While freezing U.S. weather has eroded oil inventories to their lowest level in more than a decade, fading demand for winter fuels coupled with a 35-year peak in supplies from Iraq will help replenish stockpiles, the agency said.
“Growth momentum is expected to benefit from a more robust global economic backdrop,” the IEA said in its monthly market report. Still, a seasonal lull in demand means “pressure on oil markets, ceteris paribus, seems set to ease.”
West Texas Intermediate crude futures are little changed this year, trading at about $98 a barrel today, as signs of economic recovery in the U.S., the world’s largest oil user, counter slowing growth in emerging nations. Manufacturing and jobs growth in the world’s biggest economy surpassed forecasts in February, government data showed earlier this month.
The increase in global consumption will require a higher average level of crude this year from the Organization of Petroleum Exporting Countries than previously expected, according to the report.
OPEC, responsible for about 40 percent of world oil supplies, will need to provide 29.7 million barrels of crude a day in 2014, or about 100,000 a day more than anticipated in a month ago. Still, that’s about 800,000 a day less than the group’s production in February.
OPEC’s 12 members boosted output by 500,000 barrels a day to 30.49 million in February as a surge in Iraq’s exports pushed the organization’s production above its 30-million barrel ceiling for the first time in five months, according to the IEA. Iraq’s production climbed by 530,000 barrels a day to 3.62 million a day, the most since 1979, while that of Saudi Arabia, the group’s biggest member, rose 90,000 to 9.85 million.
OPEC’s own monthly report, published on March 12, estimated the group’s output at 30.1 million barrels a day in February and Iraq’s supplies at the highest since 1980.
While all of the expansion in demand next year will be accounted for by developing nations, the pace of growth in China and other emerging nations is slowing, the IEA said. U.S. demand “continues to show signs of strengthening,” it said. Tensions between the West and Russia over Ukraine “has increased downside risk to the forecast” for global consumption, the agency said.
Unusually cold weather in the U.S. helped caused a “staggering” drop in oil inventories among developed nations, which fell by 13.2 million barrels to 2.6 billion in January, a month when they normally accumulate, the report showed. Supplies in the Organization for Economic Cooperation and Development were 154 million barrels below their seasonal average at the end of January, the widest deficit in more than a decade.
“An improving supply outlook partly offsets these recent draws,” with supplies from outside OPEC rising at the fastest pace since the early 1990s, the IEA said. Non-OPEC production, driven by the U.S., Canada and Brazil, will climb by 1.7 million barrels a day this year to 56.4 million a day, an estimate unchanged from last month’s.