World oil demand to grow more than expected - U.S. govt
WASHINGTON (Reuters) - The U.S. government on Tuesday raised its world oil demand forecast for 2011 on expectations Japan and other countries will need more crude to generate electricity, a surprise move that adds pressure on OPEC to boost production.
The U.S. Energy Information Administration projected world oil consumption would rise by 1.7 million barrels per day to 88.43 million bpd this year, upping the monthly forecast by 300,000 bpd from its estimate in May.
It marked the biggest revision yet by the EIA to its 2011 oil demand forecast. In May, the agency had cut the outlook by 120,000 bpd.
Analysts had expected the EIA to reduce its forecast further this month after a slate of poor economic figures and some evidence that persistently high oil prices were eroding fuel demand, particularly in Western markets.
"It was pretty surprising to see the EIA revise up oil demand by so much, especially after cutting last month," said Matt Smith, commodity analyst at Summit Energy Services in Louisville, Kentucky.
The EIA said the revision was primarily supported by higher forecasts for electricity use in Japan, where the closure of a number of nuclear power plants after March's earthquake has increased oil demand, plus China and the Middle East.
"The revision shows they are less concerned about the soft spots in the U.S. economy hurting demand -- especially with the fall in gasoline prices coming through to limit demand destruction -- choosing instead to focus on the continued strength coming through in emerging markets, specifically China," Smith said.
JAPAN QUAKE IMPACT
The EIA raised its forecast for oil consumption by 120,000 bpd for China, 80,000 bpd for Japan and 110,000 bpd for the Middle East. China's oil demand is now expected to increase by 700,000 bpd this year, the EIA said.
"There is definitely going to be an impact from the Japan earthquake as they rebuild," said Phil Flynn, energy analyst at PFGBest Research in Chicago.
"As they start to come back online they're going to be looking for alternative energies (besides nuclear power) and oil is probably going to fit the bill," Flynn said.
The new projection puts the EIA significantly above the Paris-based International Energy Agency and OPEC's own forecast, both of which will be revised over the next week, after the producer group's policy meeting on Wednesday.
A forecast for higher demand could help convince ministers from the Organization of the Petroleum Exporting Countries to boost oil production to help meet stronger global fuel consumption expected in the second half.
An OPEC committee recommended that the producer group raise its oil output target by 1 million bpd.
Flynn said the EIA's higher forecast "is going to be another bit of evidence" OPEC ministers have to justify more oil production.
But Smith said the EIA forecast would have little to no impact on OPEC's decision. "The cartel has enough insight intothe global oil market, while each member has likely already made up their mind as to whether they should increase the production quota," he said.
Next year's oil demand is expected to climb 1.6 million bpd to 90.02 million bpd, up 10,000 bpd from the government's previous forecast.
Developing nations will make "almost all of the growth in consumption over the next two years, with the largest increases coming from China, Brazil, and the Middle East", the EIA said.
To meet that demand, the market will need to draw down global oil inventories and get more oil from OPEC and non-OPEC producers, the agency said.
Non-OPEC oil supply is forecast to rise by 590,000 bpd this year, with the biggest output increases expected to come from former Soviet countries at 210,000 bpd, Canada at 170,000 bpd,
China at 140,000 bpd and Brazil at 130,000 bpd, the EIA said.
(Graphic by Stephen Culp; Editing by Dale Hudson and David Gregorio)
- Tweet this
- Share this
- Digg this
- Malaysia military tracked missing plane to west coast - source
- UPDATE 3-U.S. Senate intelligence chief accuses CIA of spying on Senate
- Freescale loss in Malaysia tragedy leads to travel policy questions
- UPDATE 3-Libyan navy attacks ship carrying oil from rebel port; PM sacked
- Maoists kill 16 in attack on police
MISSING MALAYSIAN PLANE
Malaysia's military believes a jetliner missing for almost four days turned and flew hundreds of kilometres to the west after it last made contact with civilian air traffic control off the country's east coast, a senior officer told Reuters on Tuesday. Full Article | Slideshow
India halts plan to join global bond indexes, defers Euroclear - sources. Full Article
EXCLUSIVE - India to slash Iran oil imports to meet nuclear deal parameters: sources. Full Article