LONDON -- Global demand for oil will grow this year at its fastest rate since 1980, but the producer group OPEC's pledge to pump more crude should help ease the pressure on prices, the International Energy Agency said Thursday.
U.S. crude prices peaked this month at more than $42 per barrel, driven by fears about security in Saudi Arabia and uncertainty about whether major producers would provide more crude. The IEA, which has often urged the Organization of Petroleum Exporting Countries to augment supplies, welcomed OPEC's decision last week to raise its output ceiling and boost production.
"We take the commitments of these producers seriously," the IEA said in its monthly oil report. "All things being equal, this should moderate prices by allowing stocks to build."
The IEA is the energy watchdog for wealthy oil-importing countries. Although it analyzes the supply and demand for crude, it avoids trying to predict price levels.
Oil inventories held by importing countries grew modestly in April, but strong demand for gasoline precluded much improvement in gas inventories, the IEA reported.
U.S. oil prices peaked June 1 at $42.33 per barrel for light crude for July delivery. They've fallen nearly 10 percent since then although July contracts of light crude were trading 81 cents higher Thursday at $38.35 on the New York Mercantile Exchange.
Gasoline prices have not followed crude downward, due to refining constraints, environmental standards for reformulated gasoline and other unique factors.
Falah Aljibury, an independent energy analyst, said the only way to reduce U.S. gas prices would be for the United States to import more gas.
"And the only way we can import more is by relaxing temporarily the environmental standards we set for gasoline until we see ... a drop in gasoline prices like we're seeing in crude," he said by telephone from his office in Alamo, Calif.
The IEA revised its annual outlook for oil demand upward by 360,000 barrels a day, due largely to brisk growth in India, Brazil and China. The IEA now predicts that demand will grow by 2.3 million barrels, or 2.9 percent, over last year's level. The agency said that will be the fastest rate of increase since 1980 but didn't cite a 1980 figure for comparison. Demand grew 2.3 percent in 2003 over 2002.
This is the eighth consecutive month in which the IEA has made an upward revision in demand. John Waterlow, an analyst at Wood Mackenzie Consultants in Edinburgh, Scotland, suggested that one reason for these revisions is the scarcity of timely statistics for many less-developed countries.
"You've got huge chunks of the world that are completely uncatalogued in the short term," he said.
Average demand for 2004 will total 81.1 million barrels a day, up from 78.8 million barrels in 2003. Much of this growth stems from "a number of one-off factors," including low interest rate policies and tax cuts in some importing nations, large infrastructure projects in China, depleted oil inventories and spending in the war on terrorism, the IEA said.
"This cannot last, and the move to add physical barrels constitutes a responsible action on the part of producers to help stabilize the market," the report said.
OPEC, which supplies more than a third of the world's crude, announced on June 3 that it would raise its output target by 2 million barrels starting July 1 and, if necessary, by an additional 500,000 barrels on Aug. 1. In addition, it urged its members to do as much as they could to help stabilize the market.
Saudi Arabia, OPEC's biggest member, has said it will boost its actual production by as much as 2 million barrels if crude prices stay too high. Saudi Arabia is the only OPEC member with significant spare capacity to produce more crude. It has said it will pump fresh barrels regardless of what its OPEC partners do.
OPEC's 11 members hiked their actual daily production in May by 470,000 barrels over April, accounting for all of last month's net increase in global supplies. Saudi Arabia and the United Arab Emirates accounted for most of this increase, the IEA said.
However, Iraq, which has the second-largest proven reserves after Saudi Arabia, suffered sabotage of its pipeline flows and saw production and exports decline for the second month in a row. Iraq doesn't participate in OPEC's output agreements.
OPEC's other members pumped 2.6 million barrels, or 11 percent, above last month's ceiling of 23.5 million barrels.
"Further supply increases are expected for June," the IEA said.
Wood Mackenzie's Waterlow said the IEA was probably correct in assuming that OPEC's members would fulfill their pledges to boost output.
"We know now that the Saudis are pretty much going to pump as much as they can," as are the United Arab Emirates and Kuwait, he said.
Russia, currently the No. 1 producer, also raised production in April and, according to provisional IEA estimates, in May. Russia doesn't belong to OPEC.
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