IEA sees oil use rising as global growth picks up

Global oil demand will rise more quickly this year as economic growth in industrialized countries accelerates, absorbing more supply even as US shale oil production reaches record highs, the West’s energy watchdog said.

The International Energy Agency (IEA) said world oil consumption would increase by 1.3 million barrels per day (bpd) in 2014, 50,000 bpd higher than previously forecast.

“Global oil demand growth appears to have gradually gained momentum in the last 18 months, driven by economic recovery in the developed world,” the IEA said in its monthly report.

“Most OECD economies have by now largely exited the restraints of recession, with strong gains in some countries in the energy-intensive manufacturing and petrochemical sectors.”

Oil demand growth has been boosted by a robust economic rebound in the US, where the IEA has revised up its 2013 demand estimate by 180,000 bpd to 18.9 million bpd.

US oil production is increasing rapidly and is forecast to rise by 780,000 bpd this year, but the Organization of the Petroleum Exporting Countries (OPEC) will also have to pump more to meet increasing demand.

The IEA, which advises most of the largest energy-consuming countries on energy policy, raised its demand forecast for OPEC oil this year by 200,000 bpd to 29.4 million bpd.

Last year, political unrest led to a plunge in Libyan exports, at times to less than 10 percent of capacity, and more Iranian barrels disappeared from the market due to sanctions. 

But OPEC crude oil supply edged higher in December, reversing four months of declines, the IEA said, with Saudi Arabia and the UAE leading the increase. Libya saw a modest rise, and Iraq was the only member to post a fall.

Iranian supplies contracted by 200,000 bpd last year but edged higher in December as diplomatic activity aimed at halting Tehran’s nuclear activity gained momentum.

The IEA said rising US crude production helped balance the effects of supply disruptions among some OPEC countries.

“Most prominent among those shifts was the relentless rise in US crude production, whose 990,000 bpd growth, one of the largest annual gains on record for any country, helped blunt the impact of supply declines elsewhere, notably Libya and Iran,” the report said.

The loss of oil production from Libya and Iran has helped keep a floor under prices, but the increasing US output has limited rises.

Brent crude averaged around $108.70 a barrel last year, about $3 less than in 2012, and on Tuesday traded around $107.

US production growth in 2013 far surpassed the IEA’s own projections, registering the fastest absolute annual supply expansion of any country in the past two decades, the report said.

However, the IEA said the energy industry had absorbed the extra supply through refinery and pipeline expansions and growth in crude rail transport.

“The trend in US production looks set to continue in 2014 and beyond, providing once again the largest changes in the market,” the report said.

Demand over the last few months has depleted oil inventories despite rising production, it said.

The Paris-based agency said commercial oil stocks in the world’s industrialized nations plummeted in November by 53.6 million barrels, the biggest monthly decline since 2011.

Preliminary data for December suggests a further 42.5 million barrel draw in OECD inventories.