Oil back over $54 as IEA raises demand forecasts

Oil prices rose back above $54 on Friday as the International Energy Agency said robust growth in the United States and China will pump up consumption even faster than expected this year. US light crude rose 71 cents to $54.25 a barrel after tumbling more than $1.20 on Thursday. Brent crude in London was up 42 cents at $53.08 on Friday, having set a record $54.30 on Wednesday.
The International Energy Agency said in its monthly Oil Market Report that estimated demand growth this year has been revised up by 290,000 barrels per day (bpd) to 1.81 million bpd, taking annual global consumption to 84.3 million bpd.
The IEA has revised its estimate for 2005 world demand growth up by 500,000 bpd in the last three months, as synchronous growth in the Chinese and US economies proves more resilient than expected to the impact of higher energy costs.
"In real terms and relative to incomes oil prices are not yet at extreme levels," said Michael Lewis, head of commodities research at Deutsche Bank in a report.
"When crude oil prices are deflated by G7 consumer price inflation, we find that oil prices would need to rise to $60 a barrel and $100 a barrel in current nominal dollars to be equivalent to the two price peaks during the 1970s," Deutsche Bank said.
Prices this week came within 2 cents of October's all-time peak at $55.67 following a 12 percent gain in the past month driven by concern that rapid demand growth will strain oil supplies through this year. Even so Opec oil producers are keeping a close watch over rising crude stocks in developed countries ahead of the usual second-quarter slowdown, when temperatures warm up.
Iran, Qatar, Venezuela and Algeria have come out in favour of keeping production steady.
More support was seen in China's February crude oil imports, which bounced back from a 14-month low in January, a sign that demand in the world's second-biggest consumer was not slowing.
Long term supply security concerns also relaxed a little as US Secretary of State Condoleezza Rice told Reuters Washington would offer Iran economic incentives to abandon its suspected pursuit of nuclear weapons, marking a major shift in policy.
Washington had previously refused to reward Iran for what it regards as bad behaviour.