London - Iraq's oil growth targets look increasingly at risk, the International Energy Agency said, highlighting the growing threats to supplies from political instability and violence in Opec members just as demand is picking up due to a stronger global economy.
Still, the adviser to the United States and other industrialised countries also said in its Medium Term Oil Market Report on Tuesday that global growth in oil demand may start to slow down by the end of this decade due partly to high prices.
Oil prices jumped to almost $115 a barrel last week, the highest since September, as advances by Sunni insurgents in Iraq raised concern that more of the country's supply could be disrupted.
Iraq is the second-largest producer in the Organisation of the Petroleum Exporting Countries. Some of Iraq's exports have been offline since March, while Opec output has also been hit by unrest in Libya, sanctions on Iran and oil theft in Nigeria.
“Within Opec, Iraq remains the main source of most of the expected capacity growth, but this expansion looks increasingly at risk,” Maria van der Hoeven, the IEA's executive director, wrote in the report's Foreword.
At present, the agency expects Opec to increase its production capacity by 2.08 million barrels per day (bpd) - to 37.06 million bpd by 2019. More than 60 percent of the growth is expected to come from Iraq.
The report contrasts with the IEA's previous medium-term update in May 2013, which forecast US shale oil would help meet most of the world's new oil demand, leaving little room for Opec to lift output without risking lower prices.
Now, the IEA expects world oil demand in 2014 to average 92.76 million bpd, 960,000 bpd more than expected in May 2013. Global demand growth will accelerate to 1.42 million bpd next year from 1.32 million bpd in 2014, it said.
Opec members will need to pump more oil than expected in the previous medium-term report, the IEA said, raising its forecast of global demand for Opec crude plus inventories by 900 000 bpd to 30.1 million bpd in 2014.
“Oil markets are in many ways tighter today than they were at the onset of the US shale and tight oil boom, and considerably tighter than they were a year ago,” the IEA said.
Underlining the steady shift of oil demand growth to Asia, the IEA said China would overtake the United States as the world's top crude oil importer as soon as this year.
While seeing faster demand growth in 2015, the IEA now sees a slowdown further down the road, citing environmental concerns and cheaper alternatives to oil.
“While 'peak demand' for oil, other than in mature economies, may still be many years away, peak oil demand growth for the market as a whole is already in sight,” it said. - Reuters