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World oil demand still surging

The global thirst for oil continues to outpace expectations, led by surging growth in demand for crude from China, India and other Asian countries, the International Energy Agency reported Wednesday.
/ Source: The Associated Press

The global thirst for oil continues to outpace expectations, led by surging growth in demand for crude from China, India and other Asian countries, the International Energy Agency reported Wednesday.

Southern and eastern Asia account for much of the 3.7 percent increase in demand from developing countries that the agency forecasts for this year. Developing nations are seeing their fastest growth in demand since 1997, the IEA said in its monthly oil market report.

As a result, the agency raised its estimate of demand growth from its last prediction in January. Demand in 2004 would grow 220,000 barrels a day faster than the IEA predicted last month, and total annual demand would climb 1.8 percent to 79.9 million barrels a day.

"This reflects the strong pull of Chinese economic expansion on neighboring economies," together with a rebound in Middle Eastern economies, the agency said. The Paris-based IEA is the energy watchdog for the United States, Japan and other wealthy oil importers.

Although the IEA analyzes the supply and demand for crude, it avoids what it considers the politically sensitive task of trying to predict prices.

Worldwide production of crude in January was almost unchanged from the previous month, at 82.1 million barrels a day, the agency said. A decline in output from OPEC, the Organization of Petroleum Exporting Counties, offset a slight rise in supplies from non-OPEC producers including Russia and Brazil, the report said. OPEC pumped 145,000 fewer barrels a day in January, while independent producers boosted their supplies by 132,000 barrels.

The IEA issued its report one day after OPEC oil ministers meeting in Algiers made a surprise decision to curb their production by as much as 2.5 million barrels a day. The 10 OPEC members that participate in the group's quota system pledged to cut their output by 1 million barrels a day starting April 1 and to stop producing more than their quotas. If effective, the two-stage effort could trim OPEC's production by nearly 10 percent.

Some analysts say the OPEC cuts could translate into higher prices for gasoline and other refined products.

"We should get a softening of prices in the second quarter, ... but the market's still going to be tight," said Jamal Qureshi of PFC Energy, a Washington consultancy. "Once you get past the second quarter, it's really all up from there."

OPEC's planned cut in its members' output quotas could cause U.S. crude prices to rise by $1-2 a barrel. Such an increase would also affect retail prices for gasoline, Qureshi said in a telephone interview.

Crude inventories in the United States remained below their five-year average in December, in part due to the high cost of replenishing them, the IEA said. Low inventories add to upward pressure on crude prices.

China's annual growth for crude slowed somewhat in January from a blistering 16 percent during the third quarter of last year. Chinese demand grew last month by 10 percent, mostly because capacity constraints in the country's infrastructure kept it from making good use of even more oil, the IEA said.

"They're just pulling in more crude. Demand is clearly stronger than a lot of people expected," Qureshi said of the Chinese.

The IEA noted that Vietnam, Thailand and India also were voracious consumers of oil in January.

By contrast, the growth in demand for crude in rich countries slowed sharply in the fourth quarter of 2003. After revising its data, the agency halved its earlier estimate of demand growth in wealthy nations to just 0.4 percent during the October-December quarter.

The IEA attributed the slowdown partly to a mild winter and a smaller than expected consumption of heating oil in North America. However, the agency described the decrease as temporary and said it expected the appetite for oil in rich countries to pick up during the second half of the year.

In afternoon trading Wednesday in New York, light sweet crude oil for March delivery was up 28 cents to $34.15 a barrel.