New non-OPEC oil supplies will outpace extra demand next year and undermine OPEC's efforts to defend high oil prices, the International Energy Agency (IEA) said today.
In its first projections for world oil market fundamentals in 2004, the Paris-based agency said it saw non-OPEC pumping another 1.32 million barrels a day (bpd) accelerating from growth of 1.11 million bpd this year.
"A combination of high prices, industry restructuring and technological advance mean the peak in non-OPEC supply has yet to be reached," said an IEA adviser.
"Oil prices are expected to come under sustained downward pressure next year from their current high levels on the back of rising production, providing further stimulus to oil demand both directly and indirectly by fostering economic growth."
Extra non-OPEC oil should be more than enough to supply incremental world oil demand, losing OPEC market share to non-OPEC rivals such as Russia for the fifth year in succession, said the agency.
World demand is expected to grow by 1.05 million bpd to 79.1 million after an increase this year of 1.01 million bpd.
Demand for OPEC crude is projected falling by 700,000 bpd to 24.6 million, 1.1 million bpd less than the IEA estimated OPEC pumped last month.
The IEA said low stocks could support oil prices in OPEC's $22-$28 price target band for at least the rest of the year.
But it adds: "The underlying erosion of the call on OPEC as it defends its current price band suggests that there could be a rough ride ahead in the oil market."
OPEC will not tinker with oil production quotas at its meeting later this month if prices stay at current levels, the cartel's president said last night.
OPEC President Abdullah al-Attiyah said Iraq's inability to dramatically boost output as it grapples with post-war sabotage and looting has had a psychological impact on oil markets, and has kept prices high.
But after surveying customers, the Middle East-dominated cartel believes the world has enough crude, Mr al-Attiyah said.
"The oil price is within the band, and we said when the oil . . . is in the band between $22 and $28 [a barrel], we will do nothing," he said.