The IEA said demand for fuel in Asia was increasing at an "astonishing" rate. Oil demand in China spiked 28% in January according to the IEA. This prompted the organization to raise demand estimates for developing countries even though demand in developed countries remained flat.
The IEA raised its global demand estimates for the second month as developing nations rebounded from the recession faster than the West. According to the IEA, "Global oil demand resumed growth on a yearly basis in Q4 after five consecutive quarters of decline. This year's global oil demand growth will be driven entirely by non-OECD countries, with non-OECD Asia alone representing over half of total growth."
China will represent almost a third of that growth and offset stagnant consumption in developed countries, especially in Europe. The IEA raised its demand estimates by 70,000 bpd to 86.6 mbpd in 2010. That represents a gain of 1.6 mbpd or +1.8% over 2009 levels.
As a result of China's +28% year over year growth in January the IEA raised their demand forecast for China by 130,000 bpd to 9.0 mbpd. That represents a 6.2% jump from 2009. The IEA believes that the big jump in demand in January was due in part to timing of deliveries relative to the weeklong Chinese New Year celebration in February.
The IEA cut its forecast for oil consumption in developed countries by 120,000 bpd from its January predictions. The additional decline was due to the lack of a rebound in developed countries led by Europe. The U.S. is seeing a marginal increase in demand but Europe is still mired in unemployment and recession.
According to the IEA OPEC compliance with the 2008 production cuts fell to 56% in February from 58% in January. OPEC produced the most oil in 14 months in February with output of 26.7 mbpd. That is an increase of 80,000 bpd over January. That means OPEC exceeded its targets by 1.9 mbpd. That is a lot of extra oil on the market and you can expect to hear a lot of complaints about non compliance when OPEC meets on Wednesday. Those complaints will only be for the press because every OPEC country with the exception of Venezuela produced over quota. Venezuela can't even produce its current quota because of the damage Chavez has caused to the oil sector.
OPEC has a major problem ahead in its efforts to manage oil production and prices. That problem is Iraq. The country does not currently have a quota limit because of the war and currently produces a very volatile 2.5 mbpd. If Iraq can increase production as claimed they could come close to 9 mbpd in 3-5 years. Odds are very good they are NOT going to abide by any quotas and without the peak oil scenario coming to pass in 2012 or shortly thereafter they are going to be a huge problem. I will write more on this tomorrow.
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