Faster economic growth next year, particularly in the developing world, will drive oil demand higher than previously expected, the International Energy Agency said Friday. The Paris-based IEA, which advises oil-consuming countries, said crude demand would reach 86.1 million barrels a day in 2010, up 1.7 percent from this year, the IEA said in its monthly oil report. That's up from the IEA's forecast last month for oil demand of 85.7 million barrels a day in 2010. The IEA said “buoyant economic activity in more oil intensive emerging countries” was largely the cause of its revision. It also noted the International Monetary Fund's move last week to hike its forecast for economic growth next year to 3.1 percent, up from its April forecast of 1.9 percent growth. The agency said, however, that “the outlook for 2010 is still fraught with uncertainty,” and said 2010 oil demand could be significantly lower if economic growth next year is less than forecasters now project. “Things are looking better from an economic perspective,” said David Fyfe, editor of the IEA report. Crude consumption next year - led by emerging markets like China - is forecast to grow by 1.4 million barrels a day, up 350,000 barrels a day versus the agency's September report, to 86.1 million barrels a day. Next year's expected oil demand would be on par with the levels seen in 2007-08, underscoring the relative weakness of economic activity. Supply is also still abundant. The IEA said OPEC's 11 quota-bound members in September pumped about 1.6 million barrels a day above their production target of 24.845 million barrels a day as various members produced additional crude to glean more oil revenue. The increased production is helping keep crude inventory and related oil-products such as gasoline safely above historical average levels. The International Monetary Fund, whose projections play a key role in shaping the IEA's oil demand forecast, early this week revised up its global gross domestic product outlook to 3.1 percent for 2010 led by emerging markets. The revision is about half of one-percentage point higher than the IMF's previous call in July. Oil prices Friday traded down about 40 cents at $71.30 on the New York Mercantile Exchange. Prices are up almost 60 percent this year, but have been generally range-bound the past few months between $65 and $75 a barrel. Prices have been unable to push higher due to lingering uncertainty about the scope and pace of economic recovery in the US, the world's biggest energy consumer, and elsewhere. Concern has mounted about when governments, particularly in the US and Europe, may start pulling back on stimulus measures that could undercut the budding recovery in oil demand. “The world economy is likely to face a serious policy risk in 2010 as governments seek to gauge the proper timing for the withdrawal of monetary and fiscal stimulus. Getting the timing right will be essential,” analysts at PFC Energy said in a research note late Thursday.
