"The oil market is expected to have a robust cushion against any sudden surge in demand or disruption in supply," the International Energy Agency (IEA) said Friday in its monthly oil market report, pointing to existing level of excess inventories, ample crude oil spare production capacity and idle refinery capacity, surging fourth quarter oil demand, increasing Chinese consumption and robust gasoline use in the U.S.
Oil prices recently hit a two-year high of $90 a barrel as IEA described demand jumps as "exceptional" and "giddy."
The agency forecasts 2011 year-on-year global demand growth of 1.3 million barrels per day (bpd), compared with the 2010 rise of 2.5 million barrels, assuming oil prices will trade within the $75-85 range through 2015.
IEA has also increased its 2011 oil demand growth forecast by 130,000 bpd to 1.32 million bpd and boosted its 2015 consumption projections.
The IEA December report also raised its 2011 demand
forecasts in some important respects compared with the previous monthly reports. For example, the IEA adjusted its projection for the 2011 "call" on the Organization of the Petroleum Exporting Countries' (OPEC) production to 29.5 million bpd – an increase of 100,000 – due to estimated higher demand.
An increase in world oil demand, compared to previously
expected numbers, is based on the assessment that the recovering global economy will drive up consumption, the IEA said, increasing the need for oil from producer group OPEC.
In its monthly report, also issued Friday, OPEC fractionally increased its oil demand forecast for 2011 and said high inventories and spare capacity should be enough to deal with any eventualities.
OPEC said demand for its crude in 2010 reached an estimated 28.9 million bpd, up by about 100,000 barrels from the report issued last month.
OPEC estimates demand for its crude in 2011 would rise by 300,000 bpd, to 29.2 million. The group meets tomorrow in Quito, Ecuador.
According to the Paris-based agency, some capacity decline is forecasted for 2011, expected in Algeria, Angola, Iran, Kuwait, Saudi Arabia and Venezuela. Not all of the capacity is currently used after the group reduced output last year.
Saudi Arabia, which is currently producing about 8.3 million bpd, is expected to have an average production capacity of 12.08 million bpd this year and 12.04 million bpd in 2011, the IEA said.
Friday's IEA report said an "astonishing" 12.6 per cent Chinese year-on-year growth in October's oil consumption amplified inflation concerns, reflecting the organization's worries about the oil markets and the global economy in general.
"The strength of China's oil demand is consistent with other indicators suggesting that the economy is in danger of overheating," the report said. "Not only does gross domestic product growth continue to hover around the 10 per cent mark, but inflation is also creeping up."
The agency also projected that global oil demand growth would likely moderate in 2011 amid "renewed structural decline" in developed economies and a moderation in the Chinese economy.
Oil prices were essentially flat Friday morning, up 4 cents to $88.41 a barrel on the New York Mercantile Exchange.