IEA Revises Oil Stock Data Upwards

Fri June 13, 2003 08:08 AM ET By Tom Ashby

LONDON (<a href=reuters.com>Reuters) - The West's energy watchdog, the International Energy Agency (IEA), made on Friday an unprecedented 79-million-barrel upwards revision to its oil inventory data for the industrialized world in March.

The healthier supply picture knocked world oil prices lower, and analysts said the appearance of such a large volume of oil backed up OPEC concerns of oversupply in the third quarter.

The IEA said the timing of the revision was unfortunate, given that the world oil market was seeking direction after the U.S.-led war on Iraq, but that it did not change its view that global markets were tight, especially for gasoline.

"The market is obviously better supplied than we thought as little as two weeks ago, but stocks are still low and fundamentals are still tight, so we need to build more stocks," said Klaus Rehaag, editor of the IEA monthly oil market report.

Benchmark Brent crude oil fell 41 cents to $27.42 per barrel, while U.S. crude futures lost 47 cents at $31.04.

Geoff Pyne, oil market consultant to Sempra Energy Trading, said the revision showed that the OPEC exporting cartel, which stayed its hand on output cuts earlier this week, was right to be concerned by surplus supply.

"All the signs from OPEC were that they knew that U.S. oil prices should not be at $31 a barrel. I thoroughly agree," Pyne said. "Stocks are still below normal and can absorb some surplus in the third quarter, but I think we have entered a stage when more supply is coming on the market and will impact prices."

STOCKS ROSE IN APRIL

After the revision, the IEA said inventories fell at a rate of 570,000 barrels per day (bpd) on average in the first three months of the year. Stocks switched to a rising trend in April, building by an average 720,000 bpd in that month.

The agency said industry stocks in the industrialized world at the end of April at 2.439 billion barrels were still 157 million barrels below the previous year.

OPEC crude output in May rose by 220,000 bpd in May to 26.4 million bpd, the IEA said, due to a recovery in Venezuela and Nigeria where production was crippled earlier this year by strikes and ethnic clashes. Iraqi output was also rising.

OPEC ministers at this week's meeting in Qatar agreed to leave their output ceiling of 25.4 million bpd unchanged, though the group had earlier contemplated a cut to accommodate rising Iraqi volumes.

OPEC signaled instead that it could cut supplies when it meets again in Vienna on July 31.

The IEA forecast for oil demand growth this year was unchanged at 1.0 million bpd, the strongest rate for four years, taking average demand for the 12-month period to 77.9 million bpd.

The agency revised downwards its estimate for demand in the second quarter, but raised forecast demand for the second half of the year.

"Fuel substitution into oil will remain a key driver of demand growth in the third quarter, spurred by extended nuclear power plant shutdowns in Japan and sustained high natural gas prices in the U.S.," the IEA said.