Supply problems heightenneed for Opec oil, says IEA

Opec producers will need to pump more oil than expected to meet demand during the northern winter because of supply problems outside the organisation, the International Energy Agency (IEA) said yesterday.

Oilfield disruptions in North America and the North Sea, and continued strong consumption growth, means demand for Opec oil in the first quarter 2005 will be 500,000 barrels per day (bpd) higher than previously expected at 28.6 million bpd, the IEA said in its monthly Oil Market Report.

Lower-than-expected growth in non-Opec production has helped tighten world oil supply already strained by rapid demand growth in the United States and China, and a lack of refining capacity in industrialised nations.

"Most forecasters, the IEA included, expect oil demand growth to slow in 2005. But if oil consumption were to surge as fast as in 2004, would producers be able to rise to the challenge?" the IEA said.

Disruptions to Norwegian offshore fields and Canadian synthetic crude facilities helped cut 165,000 bpd from non-Opec output in December, said the IEA which advises industrialised nations on energy policy.

Non-Opec output growth last year of 1.4 million barrels per day output fell 500,000 bpd short of a year-earlier forecast, the IEA said.

The IEA revised down its forecast for non-Opec supply growth this year by 160,000 bpd.

Disappointing non-Opec supply also lifted the IEA's forecast "call" on Opec's crude by 300,000 bpd for the second quarter this year a period when Opec fears prices could fall as demand declines following the northern winter.

Opec has already agreed to withdraw 1 million bpd of supply from January 1 to protect prices and cap an out-of-season stockbuild projected for the northern winter.

Total global stocks rose 1.4 million bpd, or 42 million barrels in November, led by increases in the Pacific region, the IEA said. End-November stocks stood 81 million barrels above previous year levels, the Paris-based agency said.

"Opec cut production because it was concerned about inventory levels and from the IEA report it seems Opec was right," said Adam Sieminski of Deutsche Bank in London.

The group's production cuts have helped push oil prices to a 7-week high as a cold front threatens to test low heating fuel stocks. US crude was up 89 cents at $49.27 a barrel yesterday.

Opec ministers will meet on January 30 to decide whether to cut production quotas ahead of the second quarter.