Rapid global economic expansion is fuelling the biggest increase in world oil demand growth for 16 years, the International Energy Agency (IEA) said on Wednesday.
In its monthly Oil Market Report the Paris-based agency raised its forecast for incremental oil demand in 2004 by 270,000 barrels a day to 1.95 million barrels per day on the 80.6 million barrels per day world market.
Stronger-than-expected energy consumption among industrialised nations is bolstering explosive demand growth in China. The agency, adviser on energy to 26 industrialised nations, said its world growth forecast represents the largest absolute increase in global oil demand since 1988.
"Such steep growth is not incommensurate with a surge in the global economic recovery," said the report.
"But this welcome resurgence in economic activity brings to the fore the issue of securing the necessary supplies to sustain the recovery."
The report comes with U.S. oil prices setting a fresh 13-year high of $40.38 a barrel on Wednesday, despite proposals from leading OPEC producers for higher output limits.
The price spike has come during the second quarter, when world oil demand is at its lowest seasonal ebb, raising concerns about prices later in the year, as demand rises again.
The IEA is forecasting world oil consumption will rise 3.8 million barrels per day from the second quarter's 78.7 million barrels per day to 82.5 million in the fourth quarter.
Much of the extra fourth quarter demand will need to come from inventories so traders are trying go calculate whether stocks are being built sufficiently during the second quarter to meet that demand.
First quarter demand data from Organisation for Economic Co-operation and Development (OECD) countries showed oil usage was 580,000 barrels per day higher than estimated by the agency last month, led by increased use of transportation fuels.
In China second quarter consumption is expected up 20.9 pct on an annual basis, or 1.08 million barrels per day, to 6.26 million barrels per day, after growth of 18.5 percent in the first quarter, the IEA said.
While the IEA's annual growth forecast for China is pegged at 750,000 barrels per day, indicating a much slower second half 2004 increase, it said the projection might prove too conservative.
"It is not expected that recent government measures to cool off economic expansion will result in significantly lower oil demand growth, regardless of their effect on the underlying economy," the report said.
High prices are not fuelling the rising flows of oil expected from non-OPEC countries.
The IEA said non-OPEC producers, other than Russia, are failing to pump as much as expected this year. The net result is an increased reliance on OPEC for extra crude.
The agency cut its 2004 forecast for non-OPEC growth by 100,000 barrels per day to 1.2 million barrels per day, a deficit of nearly 800,000 barrels per day compared to its forecast for extra world demand this year.
It said Brazil, Oman and Angola and the U.S. Gulf were pumping less then expected.
The result is a 500,000 barrels per day increase in the IEA's forecast from the average call on OPEC crude this year, lifting the projection to 26.4 million barrels per day.
