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Our Bureau

Mumbai , April 24

INTERNATIONAL Energy Agency (IEA), which reports on the global oil demand/supply and inventories, has revised its daily demand forecast slightly downward by 50,000 barrels to 1.77 million barrels a day.

This is the first downward revision in IEA's demand forecast for many months.

The forecast was revised because IEA believes that the factors that drove world crude oil prices to all-time highs since the beginning of this year seem to be dissipating. NYMEX WTI crude oil futures hit a high of over $58 a barrel in April.

IEA's reasons for a downward revision include a slowdown in Chinese demand growth to 5.4 per cent in the first two months of 2005 from the breakneck 21 per cent growth recorded in the year-ago period.

World oil supplies, which had fallen in January, have risen by 3,65,000 barrels per day (bpd) to 84.2 million bpd in March 2005. Of this, 3,15,000 bpd increase came from the cartel of Organisation of Petroleum Exporting Countries (OPEC).

According to the IEA report, oil produced by non-OPEC oil producers or the OECD countries including US, Canada, etc. is expected to jump in the second half of 2005. Also, OECD stocks fell by 39 million barrels in February. But stocks are 96 million barrels above last year levels.

Among the OPEC countries, Saudi Arabia and the United Arab Emirates increased output by 2,90,000 bpd to 29.1 million bpd. Iraqi supply was flat at 1.8 million bpd. OPEC capacity is targeted for 32 million bpd in the fourth quarter, according to IEA.

If OPEC and non-OPEC growth capacities are combined, long-term projections estimate an aggregate increase of 1.75 million bpd on an average through to 2010. This is slightly higher than average increase in long-term demand so far, at 1.5 million bpd or a growth of 1.7 per cent.

According to analyst at US-based research firm REFCO, this means that although spare capacity should recover, there will remain a need to accumulate stocks in case of fluctuations in demand.

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