Global oil demand has been running much faster than previously reported over the last three years, paving the way for an oil supply crunch that has pushed prices to record highs, the International Energy Agency (IEA) said yesterday.
The shift is just the latest in a series of revisions by the IEA to correct cautious estimates of demand, which earlier this year distorted oil markets by encouraging OPEC producers to cut back supplies more than necessary.
Revisions to world demand estimates since 2002 in non-OECD countries have pushed the forecast for this year up by 750,000 barrels per day (bpd) to 82.2 million bpd, the IEA said in its monthly oil market report.
The revisions have given a higher baseline for oil demand growth, which is running at its fastest pace in 24 years.
The Paris-based IEA left its demand growth forecasts for the next two years unchanged at 2.5 million bpd for 2004 and 1.8 million bpd for 2005.
Strong demand growth, particularly in China and the United States has helped push oil prices to record highs, with US crude on Tuesday breaching $45 (for the first time in the 21-year history of New York Mercantile Exchange futures.
Chinese oil demand growth will continue to slow in the second half of 2004 compared with the first half, as government steps to prevent economic overheating come into play, the IEA said.
"Government measures to prevent overheating of the economy appear to be bearing fruit," the agency said, noting that industrial output growth had slowed for a fifth consecutive month in July.
It added that oil demand for the second half of 2004 would look mild by comparison with sizzling growth over the same period last year.
The agency also cautioned that even though the prospect of a slowdown in demand from the world's second biggest consumer of oil after the United States was not in doubt, its scale was less certain.
The IEA, which advises 26 industrialised nations on energy policy, emphasised that its demand revisions were to plug missing gaps in historical data and not a call for more oil.
"We just don't get statistics early enough from China, Russia and other non-OECD countries. We don't just want to guess," said the report's editor, Mr Klaus Rehaag. "It would be nice if we had more accurate data, but given the inherent delays we know we will have to make adjustments."
Even so, underestimation of demand has played its part in tightening oil markets this year, by giving OPEC producers all the ammunition they needed to cut supplies.
Saudi Oil Minister Ali al-Naimi attributed OPEC's surprise supply cut at February's Algiers ministerial meeting to the IEA's forecast of a looming inventory glut.
Yesterday's revisions mean that the IEA has now raised its estimate for the likely total demand, or "call" for OPEC's oil this year, by 400,000 bpd to 27.6 million bpd.
