Rapid economic growth in China is fuelling faster-than-expected world oil demand this year, helping support high crude prices, the International Energy Agency (IEA) said on Thursday.
In its monthly Oil Market Report, the Paris-based IEA revised up its forecast for global demand growth in 2004 by 220,000 barrels a day to 1.65 million bpd on the 80.2 million bpd world market.
It almost doubled its projection for demand growth in China this year, lifting the forecast by 230,000 bpd to 580,000 bpd.
"Faster gains in electricity demand than in power generation capacity continue to boost gas oil demand for back-up generators, while demand from the petrochemical and transportation sectors remains robust," said the IEA, adviser on energy to 26 industrialised nations.
"While the sustainability of China's rapid growth rates remains a matter of debate, structural shifts in Chinese oil demand set the stage for continued expansion," it said.
The report estimated consumption in China, now the world's second biggest oil user after the United States, at a record 6.09 million bpd in January.
The IEA expects Chinese demand in 2004 to average 6.07 million barrels daily, a rise of 10.6 percent following 11 percent growth last year and six percent in 2002. China's economic boom, supported by a US rebound, is helping support world oil prices near one-year highs.
The IEA forecasts on demand may bolster bullish sentiment among hedge fund speculators who have bet heavily so far this year on benchmark crude futures contracts in New York.
Following the report US crude futures traded up 49 cents at $36.58 a barrel. "It's notable that the demand revisions are focused almost exclusively in China and non-OECD Asia and are back-loaded between April and the end of the year," said consultant Marshall Hall of London's Energy Market Consultants.
The IEA said Opec also was supporting high prices by keeping inventories tight with output restraints.
Taking a more critical line than previously against Opec, the agency said producers were encouraging investment funds to bet on high oil prices.
"Actions that promote tight balances in the face of geopolitical uncertainty, limited spare production capacity and constrained refining capacity provide opportunities for speculators," the report said.
The Organisation of the Petroleum Exporting Countries last month agreed a surprise production cut that is expected to see lower supplies in April.
The policy was partly to blame for making world oil markets "more fragile than normal" during the transition between peak winter and summer demand, the IEA added.
Opec has used the IEA's demand projections as ammunition for its supply cuts, saying lower volumes were justified by forecasts for a bigger-than-normal seasonal demand shortfall in the second quarter.
Thursday's IEA report revised higher the agency's estimate for the second quarter call-on-Opec, by 300,000 bpd to 23.9 million bpd. But it still appears to give the cartel ample justification for standing by its supply new restrictions.