London: The International Energy Agency (IEA) increased the pressure on the Organization of the Petroleum Exporting Countries (Opec) to raise oil output by forecasting a steep rise in demand later this year and predicting the strain on supply would last over the medium term.
Oil prices rose in response to the latest sets of numbers from the IEA. Brent crude hit a session high of nearly $115 a barrel on Thursday, up almost $2.
The Paris-based adviser to 28 consumer countries raised its assessment of how much Opec oil would be needed this year by 400,000 barrels per day to 30.1 million barrels per day (mbpd).
Data from Opec also indicated a need for more oil in the second half of this year.
But it failed to agree on an output increase at a meeting in Vienna last week and the group’s secretary general took exception to public comment from the IEA, which has said it would release oil from emergency reserves if necessary.
“Strategic reserves should be kept for their purpose and not used as a weapon against Opec,” Abdullah al-Badri told the Reuters Global Energy and Climate Summit this week.
In its monthly report, the IEA noted May crude supply had increased by 210,000 bpd to 29.18 mbpd, but said it was still 1.25 mbpd below production before war broke out in Libya, which is one of the member nations at Opec.
In a five-yearly forecast issued in parallel with its monthly update, the IEA made the assumption that Libyan output would not return to pre-war levels until 2014.
“We have lost 1.5 mbpd of capacity from Libya, baseline demand is higher and spare capacity has been eaten into,” David Fyfe, head of the IEA’s oil industry and markets division, said.
The IEA raised its five-year global oil demand forecast by an average of 700,000 bpd compared with the previous medium-term report issued in December.
A tightening supply-demand balance on the oil market meant the bull run since late 2010 was largely justified by fundamentals, it said.
Levels of speculative activity were lower than in 2008 when the oil market vaulted to its all-time high of more than $147 a barrel for US crude. So far this year, prices for Brent have peaked at above $127 a barrel.
The rally has inspired investment, especially in non-Opec countries, whereas Opec expansion plans have been stalled “due to a lack of investment and project delays”, the IEA said.
Overall oil supply should increase from 93.8 mbpd to 100.6 mbpd by 2016, a net rise averaging 1.1 mbpd annually, but slower than the average demand growth of 1.2 mbpd.
Significant Opec crude capacity growth is expected from joint venture investments in Iraq, Angola and the United Arab Emirates, with smaller gains from Nigeria and Venezuela. Iran, however, which has suffered from years of sanctions, is expected to struggle to increase supply and its capacity will fall below Iraq’s, the IEA said.
Dmitry Zhdannikov contributed to this story.