IEA Cuts Forecast for 2003 Oil-Demand Growth by 8% (Update1)

Paris, May 13 (<a href=quote.bloomberg.com>Bloomberg) -- The International Energy Agency lowered its estimate for growth in world oil demand in 2003 by 8 percent as the outbreak of severe acute respiratory syndrome reduces air travel and fuel demand in Asia.

Oil consumption this year will rise by 1.03 million barrels a day, 90,000 barrels less than expected a month ago, to 77.9 million barrels, said the agency, an adviser to 26 industrialized countries on oil policy. This quarter, world demand will be 400,000 barrels a day lower than forecast last month.

``The impact of SARS on jet fuel demand is pretty significant,'' said Klaus Rehaag, an IEA analyst and editor of the agency's monthly oil report.

The Organization of Petroleum Exporting Countries last month pledged to lower production in an effort to bolster prices, which have declined 12 percent this year to about $25.10 a barrel in London. The prospect of a further cut in supply when OPEC meets in June suggests oil inventories may not rise from ``precariously tight'' levels, the IEA said.

Crude oil and fuels inventories held by oil companies in Organization for Economic Cooperation and Development nations are an ``unprecedented'' 260 million barrels lower than year-ago levels and 186 million barrels lower than in 2001.

The SARS outbreak will likely reduce demand in China, the third-largest oil consumer, this quarter by 5.5 percent to 5 million barrels a day. The report assumes that the disease will be contained by the middle of the year.

Production Drops

World oil production in April averaged 78.42 million barrels a day, 1.4 million barrels less than the average in March, as the U.S.-led attack on Iraq halted the Middle East nation's exports and field maintenance reduced supplies from the North Sea.

Output from the 10 OPEC countries bound by quotas was 25.9 million barrels a day, up 167,000 barrels from March, led by increases in Venezuela and Kuwait, the agency said. Iraq, a founding member of OPEC, has no quota.

OPEC last month pledged to reduce oil supply by 2 million barrels a day to 25.4 million as of June 1 and said members may cut further at a meeting on June 11. Given the decline in inventories, further steps may not be warranted, the IEA said.

``Tough decisions lie ahead when Iraqi supply returns, but if stocks remain tight through mid-year, the extent of further cuts needed from OPEC in June may be limited,'' the report said.

Last Updated: May 13, 2003 04:53 EDT