Global recovery, China to pull oil demand in 2014: IEA

Global economic recovery and emerging markets led by China will boost growth of oil demand to a record high total next year, the IEA forecast on Thursday.

Next year, consumption by emerging markets will dominate demand overall, a position "they should hold in perpetuity", the International Energy Agency said.

But the IEA monthly report stressed that the oil market is heading into a sea of "many uncertainties", partly because oil production in the United States is "set to grow strongly".

Supply from other countries outside the Organization of Petroleum Exporting Countries (OPEC), notably Brazil, Kazakhstan and South Sudan, would also rise and was set for a 20-year record, the agency forecast.

For this year, because unseasonally cold weather had caused a big increase in demand for heating oil in the northern hemisphere in the second quarter, the agency raised its estimate for global demand by 215,000 barrels per day (bd).

This took the overall estimated annual growth to 930,000 bd, and total consumption to 90.8 million barrels per day (mbd).

The IEA estimates show demand rising by a further 1.2 mbd next year to 92.0 million barrels per day, a new record after record demand also this year.

In London, the price of benchmark West Texas Intermediate oil fell 24 cents from the closing price on Wednesday to $106.28, partly in response to the report but also due to comments on monetary policy from the US Federal Reserve and a bullish outlook for US fuel stocks, traders said. The price is at a 15-month high point, however.

Regarding supply, "upheaval in the Middle East and North Africa remains an overarching concern," the IEA warned.

"Emerging markets and developing economies are forecast to lead demand growth in 2014," the IEA said.

The growth of demand from countries outside the 34-member OECD had slowed "from the heady pace of recent years" but would "climb above total OECD demand in the second quarter of 2014," the agency said.

Recently, the speed of expansion had slowed most in China, India and the Middle East, but demand by China would still lead consumption by emerging markets, the agency said.

-- Unrest in Egypt, Syria, worries oil market --

The IEA said that the United States would play a role in "an expected steep increase in global refining activity in the third quarter of 2013".

This was part of "tectonic shifts in the mid-stream and down-stream industries."

Analysts at PVM oil brokers in London commented that the IEA report "reveals that the US shale oil boom will represent a significant growth of non-OPEC supply in 2014."

The agency said that improving prospects for global economic growth would pull demand and that demand from countries in the Organisation for Economic Cooperation and Development would shrink at a much slower pace than it had since the financial crisis began in 2008.

OECD demand would fall by 0.8 percent this year and 0.4 percent in 2014, on the basis that "OECD economies will on average return to growth in 2014".

The IEA said that oil prices had risen recently because of concerns that unrest in Egypt could affect supplies via the Suez Canal and the SUMED pipeline which runs from the Gulf of Suez to the Mediterranean Sea.

"Observers worry that the political confrontation in Egypt, like the Syrian civil war, could drag on and worsen before it gets better, and the instability could theoretically threaten production and transit through the Suez Canal," the IEA said.

Unrest had also disrupted supplies from Libya, Nigeria and Iraq.

Another factor was temporary disruption of some supply routes within the United States.

OPEC output fell by 370,000 bd to 30.61 mbd in June, but production by Saudi Arabia had risen by 100,000 barrels per day to 9.7 mbd, the highest level for seven months, the IEA reported.

At VTB capital in London, markets expert Andrey Kryuchenkov commenting on the overall IEA report, said: "The bottom line is the supply cushion remains well in place outpacing relatively modest consumption growth."

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