Prices have risen even after OPEC announced a production increase one month ago, the Paris-based IEA said in a monthly report today. World demand in 2008 will be 87.99 million barrels a day, it said, little changed from its previous assessment.
``The price reflects what's going to happen in the future,'' Lawrence Eagles, lead author of the report, said in a telephone interview today. ``Stockpiles are tighter than they were. People want to know if it is tight in the fourth quarter, are they going to be replenished in the first quarter?''
Industry stockpiles of crude and oil products in the world's most developed economies shrank by 21 million and 27.4 million barrels in August and September respectively. That contributed to an average stockpile decline of 360,000 barrels a day during the third quarter, counter to the trend of the last five years, when inventories on average rose 280,000 barrels a day, the IEA said.
Crude oil futures reached a record $83.90 a barrel in New York on Sept. 20 and traded as high as $82.33 today amid concern extra oil from the Organization of Petroleum Exporting Countries will come too late to replenish winter stockpiles in the U.S. and Europe.
Forward cover, or the number of days commercial inventories of fuel in Organization for Economic Cooperation and Development nations would last without additional supply, fell below a five- year average at the end of August, to 53.5 days, the report said.
Falling U.S. Stockpiles
Heating oil and diesel inventories in the U.S. fell 1.2 million barrels in the week ended Sept. 28 and analysts expect them to fall farther when the U.S. Energy Department announces its weekly inventory report later today. U.S. stockpiles of those fuels are more than 10 percent below year-ago levels.
``The draw in distillates in the U.S. is something to be concerned about,'' said Kevin Blemkin, a broker with MF Global Ltd. in London. ``People are saying this will be a warm winter, but that could change. If these stocks aren't building, we'll have problems.''
Additional economic assessments from the International Monetary Fund and the OECD will ``shed more light on the consequences of the U.S. subprime crisis,'' the report said. ``The threat that housing-market weakness may depress oil demand next year appears to have been pushed to one side.''
Subprime Impact
The U.S. Federal Reserve lowered the cost of borrowing by half a percentage point on Sept. 18 in a bid to slow an economic decline after a tightening in the country's credit markets.
Goldman, Sachs & Co. economists last month cut their forecast for U.S. economic growth in 2008 to 1.8 percent from 2.4 percent after the collapse of the mortgage market increased the potential for a sell-off in credit markets.
``The recent interest rate cut indicates that U.S. policy makers consider that subprime-induced downside threats to economic growth outweigh inflationary risks,'' the IEA report said.
The IEA's world oil demand outlook for 2007 was left little changed, at 85.91 million barrels a day, versus its previous forecast of 85.92 million barrels. Fourth-quarter demand was lowered by 200,000 barrels a day, in part because of downward revisions in gasoline demand data in the U.S.
Production of crude oil by OPEC's 12 members, including new member Angola, rose 240,000 barrels a day in September to an average 30.65 million barrels a day, the IEA estimated.
Saudi Arabia, Iraq
Saudi Arabian crude output rose 50,000 barrels a day last month, to 8.37 million barrels a day, while Iraqi supply rose 190,000 barrels a day to 2.18 million barrels a day, the IEA said.
Excluding Angola and Iraq, which are exempt from OPEC's output targets, the producer group pumped 26.82 million barrels a day last month, a gain of 40,000 barrels daily, the report said.
The ``call on OPEC,'' an IEA estimate of how much crude is needed from the exporter group to balance global markets, was reduced by 100,000 barrels a day for the fourth quarter of this year to 32.2 million barrels a day, in part because of an upward revision to the amount of oil that non-OPEC Russia supplies.
Crude prices in New York have averaged $66.88 a barrel in New York so far this year, compared with an average $26.12 a barrel in 2002.
Via:Bloomberg |by Bill Murray
