IEA: 2010 World Oil Demand Seen More Robust

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The International Energy Agency said Thursday it expects consumers globally, and led by China, to burn more crude oil this year than previously forecast as the economic recovery deepens.

The Paris-based agency forecast world oil demand to average 86.5 million barrels a day, representing an upward revision of 170,000 from its January report and growth of 1.8% from 2009. All of the annual increase in consumption comes from emerging markets.

Adding to the IEA report's bullish tone, the agency said the amount of unused oil packed away in storage caverns and offshore tankers continued to fall in January on incremental demand and as big producing states like Saudi Arabia keep existing production cuts in place.

But the IEA's forecast is decidedly more optimistic than most other forecasters. Its 2010 world oil demand projection is a hefty 1.2 million-1.4 million barrels a day higher than what the U.S.' main energy data agency and the Organization of Petroleum Exporting Countries are expecting this year.

The IEA is an energy adviser to mostly wealthy nations, including the U.S., and analysts say one of its roles is to talk up the need for oil markets to have plenty of crude available.

Conversely, OPEC is often more conservative on its demand forecasts, which analysts say helps the oil cartel justify keeping a tighter leash on its output to support oil prices.

The IEA bases its demand outlook on economic forecasts from the International Monetary Fund, which said recently it expects world economic growth this year to be 3.8%, up almost 1 percentage point from its autumn forecast. The IEA cautioned that its demand forecast could turn out 400,000 barrels a day lower if economic activity isn't as robust as expected.

"We are aware of the economic uncertainty...but we think there is significant growth potential in Asia, the Middle East and other [emerging] countries," said David Fyfe, editor of the IEA monthly oil market report.

Oil prices Thursday traded up about 25 cents at $74.80 in New York at 0920 GMT. Prices have tarried mostly between $70 and $80 a barrel in recent months amid somewhat conflicting economic signs.

China and other Asian states are growing strongly but many economists think the sustainability and strength of recovery in developed nations like the U.S. could be upended once governments start tightening lax fiscal and monetary programs.

Relatively weak credit growth and high consumer indebtedness have also raised questions about the health of private sector demand, which will be required for any sustainable recovery.

In its report, the IEA forecast Chinese crude demand this year to hit 8.9 million barrels a day, up 400,000 barrels a day from 2009 and 75,000 barrels a day higher than the IEA's January forecast.

Oil demand in the U.S., the world's biggest oil consumer with China a distant second, is expected to come in at 18.78 million barrels a day, about the same as 2009 and about 2 million barrels a day lower than 2007. That reflects not only weaker U.S. economic growth and industrial activity but greater energy-efficiency efforts.END