The International Energy Agency (IEA) yesterday put the Organisation of Petroleum Exporting Countries (OPEC) under pressure to leave its output unchanged at its January 30th meeting, after demand for OPEC's oil rose in response to supply interruptions among non-OPEC members.
The IEA, the energy watchdog of the industrialised world, revised upward expected demand for OPEC production for 2005 by 300,000 barrels per day (bpd) to 28 million barrels per day. It lowered its forecast for non-OPEC oil supply growth this year.
OPEC often refers to the IEA monthly reports when it makes policy decisions. The revisions will make it more difficult for hawkish members of OPEC to call for a cut in production.
Many OPEC members at the cartel's December meeting in Cairo were hoping to announce output cuts at the January meeting, to be held in Vienna.
Hurricane Ivan in the Gulf of Mexico and a gas leak in Norway's North Sea area at the end of last year reduced non-OPEC supply by 500,000 barrels per day.
These losses should persuade OPEC to keep quotas unchanged at the Vienna meeting, analysts said.
OPEC members have also seen a large increase in export prices since the organisation decided last month to rein in production above its official output ceiling of 27 million bpd.
The OPEC basket price is $42 (€32.2), a rise of $8 since the Cairo meeting. US crude futures have also risen, and were 27 cents higher at $48.61 a barrel yesterday.
"With reduced global economic activity, lagged price effects should reassert themselves in 2005 to slow demand," the IEA said.
"If not, oil demand will continue to run ahead of supply, pressuring prices and heightening volatility."
The IEA said non-OPEC supply fell by 165,000 barrels per day in December, owing to disruptions in Norway and Canada.
Although much of this output would recover in coming months, it said, expectations for North Sea, Canada, Latin America and Asia had been revised down by 160,000 barrels per day for this year.
But analysts at Barclays Capital, the investment banking arm of Barclays Bank, said the IEA was over-optimistic about non-OPEC supplies.
Most of last year's increased demand for oil was met by OPEC. It recorded its highest output in 25 years, as non-OPEC producers struggled to boost output. The IEA estimated OPEC's spare capacity at one million barrels per day. It said additional capacity increases would be difficult in the short term.
"Although high crude prices are leading to modest increases in upstream expenditures generally, a series of political, technical, institutional and economic factors will likely limit OPEC upstream capacity expansion at least in the short term," the IEA said. - (Financial Times Service)
