PARIS: More OPEC oil is needed to steady markets, where a bull run in oil prices has been driven by fundamentals, and emerging markets set to stoke demand and keep prices above $100 a barrel, the IEA said Thursday. The International Energy Agency in its latest monthly report dropped its forecast for non-OPEC oil supplies this year by 0.4 million barrels per day (mbd), but said there were indications members of the oil cartel were increasing output. IEA Executive Director Nobuo Tanaka, speaking at the presentation of the report in Saint Petersburg, said “the question is how fast and how much they can do.” Last week, the IEA expressed disappointment with OPEC's decision not to boost output quotas given persistently high prices, supply shocks and rising seasonal demand, which it said threatened to undermine economic recovery. It urged OPEC producers to pump above quota, and its latest monthly data noted that the 11 cartel members in the quota system produced 26.50 mbd, an increase from 26.38 mbd in April, and considerably above the 24.84 mbd target. “If the current price level continues, it will be at the detriment of the global economic recovery,” added Tanaka. World oil prices rebounded slightly following the publication of the report and as traders went bargain-hunting following losses the previous day, analysts said. New York's main contract, West Texas Intermediate (WTI) light sweet crude for July delivery, added 39 cents to $95.20 a barrel in London trading, while Brent North Sea crude for August won $1.41 to $114.42 a barrel. Despite the supply worries, the IEA nudged up its global oil demand forecast for 2011 from its previous monthly report by 0.1 million barrels per day (mbd) to 89.3 mbd. The IEA, the energy policy arm of the 34-member Organisation for Economic Cooperation and Development (OECD), said the rise in oil prices were due to fundamentals, not speculation. Given diminished supply flexibility in the global market “the bull run evident since autumn 2010 ... looks in large part to be justified by supply and demand fundamentals,” the IEA said in a separate report. Moreover, “despite increased upstream activity levels and resurgent non-OPEC supply, spare capacity has diminished.” It forecast both oil prices and demand to increase over the medium term due to rising demand from emerging markets, with China alone expected to account for over 40 percent of the increased demand. It hiked its medium-term price assumption by $15-$20 per barrel, with an average price of $103 per barrel now underpinning its forecasts. “Income outstrips high crude prices in the growth markets in the face of persistent, if gradually diminishing, end-use price subsidies,” noted the IEA. While per-capita oil use levels will remain lower than in the OECD, it said demographics, urbanisation and industrialisation will “push demand in the emerging markets sharply higher.”
