Demand Soaring, China to Pass Japan Next Year When
World Consumption Will Use a Billion Barrels in
Less Than Ten Days Time
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Energy Agency Raises Oil Demand Estimates
By BRUCE STANLEY
AP Business Writer
11:44 AM PST, November 13, 2003
LONDON -- Signs of an accelerating global economy, propelled by torrid growth
in China, has led the International Energy Agency -- a watchdog for the world's
biggest oil-importing countries -- to boost estimates for crude demand for this
year and 2004.
In its influential monthly oil market report, the IEA said Thursday that it has
increased its forecast for average daily demand growth in 2003 by 170,000 barrels,
arguing now that demand will grow this year by 1.28 million barrels a day. The
Paris-based agency expects daily oil demand to average 78.6 million barrels in
The IEA also raised its estimate of demand growth in 2004 by 20,000 barrels a
day to 1.08 million barrels, for an average daily world demand of 79.6 million
Although global oil demand should increase by a robust 1.7 percent in 2003, growth
will ease somewhat to 1.4 percent in 2004, the IEA said. It attributed this likely
slowdown to nonrecurring, one-time factors that have contributed to oil demand
this year, including high prices for natural gas -- a substitute fuel for oil
-- and unusually cold weather in Europe and Japan.
Chinese oil demand is set to rise by 9 percent this year. At this rate, China
will overtake Japan as an oil consumer in the second half of 2003, the agency
"At this juncture, China is the engine of oil demand growth with significant
room for further expansion in the industrial and transportation sectors," the
Despite some concerns that the Chinese economy may overheat, the IEA expressed
confidence in the country's continued strong demand for crude in 2004. China
alone should account for nearly 30 percent of global growth next year, after
contributing roughly 35 percent in 2003, the report said.
Together with China's standout performance, a surge in U.S. growth in the third
quarter and gathering momentum in Japan and parts of Europe are helping to offset
lingering economic uncertainties such as international terrorism and high levels
of household debt.
"Overall, it's a better picture being painted than we saw a month or two ago," said
Rob Laughlin, managing director of London-based brokerage GNI Man Financial.
A "feel-good factor" has already started to affect the oil market's outlook
for demand growth for the three months starting in December, he said.
Laughlin even sounded a note of caution about China, which for much of the
year has served as "a dustbin for oil that couldn't find a home" anywhere else.
If China's economy continues to sizzle, it could eventually squeeze supplies
required by Western countries as they regain their own appetites for crude,
Despite a month of volatile prices, futures contracts rose in October by an average
of $2.05 per barrel for light, sweet U.S. crude and $2.57 for North Sea Brent
crude. December contracts of U.S. crude were trading Thursday at $31.55 on the
New York Mercantile Exchange, while contracts of December Brent were trading
at $29.20 on the International Petroleum Exchange in London.
As for supplies, world oil output surged in October by 1.2 million barrels a
day to 80.9 million barrels, the IEA said. Output by the Organization of Petroleum
Exporting Countries rose by more than 400,000 barrels a day to 27.2 million barrels.
Iraqi production accounted for nearly half of this increase, although the recovery
in Iraq's output slowed compared with the three previous months, the report said.
Supplies from Russia and other non-OPEC producers grew even faster, with 725,000
more barrels a day in October than in September, it said.
OPEC members, which agreed to cut output by 900,000 barrels a day starting
in November, plan to meet Dec. 4 to reassess market conditions. If they decide
then to make deeper cuts, the IEA said they are unlikely to win over non-OPEC
producers to such a strategy unless prices fall "substantially."
Copyright 2003 Los Angeles Times
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