Wednesday, May 12, 2010

IEA Cuts Estimate for OPEC Oil Demand in 2010 as Supplies Rise

By Alexander Kwiatkowski

May 12 (Bloomberg) -- The International Energy Agency cut its estimate for the amount of oil OPEC will need to pump in 2010 on a weaker demand outlook and as supply from outside the group rises by the largest annual amount in six years.

The Organization of Petroleum Exporting Countries will need to pump 28.7 million barrels a day to balance global oil demand and supply this year, the IEA said in its monthly market report today. That is 400,000 barrels fewer than estimated last month. The agency cut its estimate for total world oil consumption from 2008 through this year because of changes to historical data.

“A baseline revision to demand and higher projected non- OPEC output are behind the revision,” the Paris-based adviser said in the report.

OPEC, which announced a record series of supply cuts in late 2008 as demand crumpled, is unlikely to alter output quotas this year, Algerian energy minister Chakib Khelil said in Doha, Qatar, May 9. A 30 percent rebound in oil prices during the past year has encouraged members to produce in excess of the allocations they agreed on in December 2008. The group pumped 29.03 million barrels a day in April, according to the IEA.

Non-OPEC producers, accounting for about 60 percent of the world’s supplies, will increase output by 800,000 barrels per day this year to average 52.3 million barrels a day, according to the IEA. That’s 200,000 barrels a day more than estimated last month.

The increase is driven by a “rare revision” to Chinese crude oil production and stronger Canadian bitumen output, the IEA said. It means non-OPEC supply is now expected to rise by the largest amount since 2004.

OPEC will also need to pump less oil than previously expected because of a cut in estimated global oil consumption, according to the agency.

Demand Down

The IEA estimates world oil demand will average 86.4 million barrels a day this year, 220,000 barrels a day fewer than the agency estimated last month, it said. That represents year on year growth of 1.62 million barrels a day, or 1.9 percent, which is 50,000 barrels a day lower than estimated in April’s report.

The revision is largely caused by changes to historical demand data for 2008 which are reflected in the total 2009 and 2010 consumption estimates, according to the IEA. Additionally, demand in some developing economies outside the Organization for Economic Cooperation and Development so far this year has been lower than estimated before.

“Demand has been weaker than previously thought in two non-OECD regions: Asia and the Middle East,” the IEA said. Malaysian consumption has been particularly weak so far this year while a worsening economic situation in Iran appears to be dampening demand there, according to the report.

OPEC output

OPEC’s production in April rose 40,000 barrels a day, according to the IEA. Supplies from the 11 members bound by quotas rose to 26.79 million barrels a day, 70,000 barrels a day more than in March. That means the group’s compliance with the record output cuts slipped to 54 percent last month. Iraq is not bound by the quota.

OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The organization’s next meeting is scheduled for Oct. 14 in Vienna.

--Editors: Raj Rajendran, Rob Verdonck.

To contact the reporter on this story: Alexander Kwiatkowski in London at

To contact the editor responsible for this story: Stephen Voss at

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