IEA raises estimate of need for OPEC oil in 2006
LONDON (Reuters) - OPEC will need to pump more oil this year than previously expected to meet rising world demand and cover a shortfall from other producers such as Russia, the International Energy Agency said on Wednesday.
The agency, an adviser to 26 industrialized countries, also said it expected no early end to concerns over Iranian supply, raised by Tehran's nuclear row with the West, and lost output in Nigeria that have helped push oil near a record high this week.
U.S. crude has risen to nearly $70 a barrel as violence in Nigeria cuts output by almost a quarter, increasing a strain on supply. The IEA's report points to a narrower balance between supply and demand, analysts said.
"The data flow is indicating a tighter market -- supply being reduced and demand being revised up," said Kevin Norrish, an analyst at Barclays Capital in London.
Higher-than-expected use in the Middle East and Asia Pacific prompted the Paris-based IEA to raise its estimate for world demand this year by 300,000 barrels per day to 85.1 million bpd.
While raising demand figures, the IEA trimmed its estimate for growth in oil use in 2006 by 20,000 bpd to 1.47 million bpd and said demand would be higher with lower oil costs.
"Robust global economic growth continues to support oil product demand, but the negative effects of high oil prices are visible in most areas," the report said.
"Without high prices, oil demand would undoubtedly be much stronger."
OPEC CRUDE
A combination of higher demand and lower non-OPEC supply increases the burden this year on OPEC, source of more than a third of world supply, according to the report.
The Organization of the Petroleum Exporting Countries, already pumping oil near capacity, needs to pump 29.4 million bpd this year, 400,000 bpd more than expected last month and 300,000 bpd less than members produced in March, the IEA said.
Mike Wittner of investment bank Calyon said the rise in expected demand for OPEC oil was important as it highlighted the group's lack of reserve production capacity.
"It does increase the call on OPEC crude and that does have some significance," he said. "There is some spare capacity in Saudi Arabia, but it's the type of crude that nobody wants."
Top world exporter Saudi Arabia has said there is not enough demand from refiners for the medium and heavy crudes that constitute the bulk of its unused output capacity.
In March, world oil supply fell by 125,000 bpd to average 84.5 million bpd, in part because of lower output from Nigeria, Canada and the UK.
Outages are delaying a non-OPEC supply rebound into the second half of 2006, the IEA warned, saying bad weather, mechanical snags, delays and strikes have affected output from Argentina to Yemen.
Supply missed most forecasts last year after hurricanes in the Gulf of Mexico damaged rigs. Annual non-OPEC output can miss forecasts by 300,000 to 400,000 bpd, the report said.
RUSSIA OUTLOOK
The IEA now expects production from outside OPEC to rise by 1.15 million bpd this year, less than previously thought, and it nudged down an estimate for growth in Russia, the world's second-largest exporter, to 2.8 percent.
Colder-than-usual weather in western Siberia trimmed Russian production this year and the IEA lowered its forecast of supply from oil firm Sibneft <SIBN.RTS>,, which has been bought by Gazprom <GAZP.RTS>.
But output from YUKOS <YUKO.MM>, the Russian company hit with $33 billion in back taxes forcing the sale of its main production unit, has stabilized after falling last year.
"Russian supply growth had to be revised down last year because of problems surrounding YUKOS," said Lawrence Eagles, head of the IEA's Oil Industry and Markets Division.
"However, there are other sectors which are growing and the decline in YUKOS appears to be flattening off."
