U.S. News

IEA Sees Stronger World Oil Demand Growth in 2008


World oil demand will grow more quickly in 2008, though higher production and refinery capacity should ease pressure on supply, the International Energy Agency said on Friday.

In its Monthly Oil Market Report, the adviser to 26 industrialised countries said demand will rise by an average 2.2 million barrels a day in 2008, up from this year's expansion of 1.53 million bpd.

The outlook comes as oil prices are trading above $76 a barrel, closing in on a record high near $79, on concern of a tightening market. Next year's supply and demand balance should be more comfortable, the IEA said.

"We see a slightly easier situation in several ways," said Lawrence Eagles, head of the IEA's Oil Industry and Markets Division. "Total crude and liquids growth is in excess of demand growth."

Oil demand next year will average 88.2 million bpd, the agency said. It cut expected demand growth this year by 140,000 bpd to 1.53 million bpd after receiving new data for 2006.

The growth in demand will lift the need for OPEC oil in 2008 by 600,000 bpd to a range of 31.7 million bpd to 32.3 million bpd, the agency forecast.

Even so, OPEC's oil production capacity will rise by 1 million bpd next year, and non-OPEC output is expected to rise by 1 million bpd and biofuels output by 350,000 bpd.

In addition, the IEA expects the world's oil refining network to expand by 1.5 million bpd next year, easing a strain on fuels production. Almost half of the growth will be in China.

"Overall, both in terms of spare upstream capacity and refinery flexibility, 2008 looks at this stage to be slightly more comfortable than 2006 and 2007," said the report.