World energy demand has emerged largely unscathed from the most active Atlantic hurricane season on record and prices could shoot higher as consumption recovers, the International Energy Agency said on Thursday.
Record high prices, mild weather and disruption immediately after hurricanes Katrina and Rita slowed demand, but the IEA predicted a recovery especially if temperatures fall below normal during the northern hemisphere winter.
"With crude and product prices now below pre-hurricane levels and refinery and crude capacity returning, the market appears to have weathered the worst of the storm," the IEA wrote.
But it said there could be further trouble ahead. "This could be the calm after the storm, or simply the storm's eye - either way, smooth sailing is not assured."
After hitting a record of $70.85 at the end of August, US light sweet crude prices have fallen by more than $12. Energy demand growth for 2005 was revised down by 70,000 barrels per day (bpd) to 1.2 million bpd, the IEA said in its monthly oil market report.
It forecast next year's demand growth would slow by 90,000 bpd to 1.66 million bpd.
Over the year, the IEA has made deep cuts to its demand growth forecasts for 2005, but the prediction for 2006 has been little altered since first published in July.
The IEA said that the recovery of the US oil industry from hurricane damage was slow, even though refineries had coped relatively well, and said tight product supplies could drive crude prices higher, especially if the winter proved to be colder than normal.
It also foresaw stronger oil demand in China in the fourth quarter.
After months of relatively weak growth, Chinese apparent demand rose by an estimated 8.6 percent in September, partly because of robust economic growth and partly because of government efforts to limit product exports.
Looking to next year, it appeared demand for transport fuel would grow by eight to 10 percent as the economy continued to expand, the IEA said.
Supplies to world markets rose by 865,000 bpd to 84.4 million bpd on average in October, with half the increase from North America as it recovered slowly from hurricane damage.
The Organisation of the Petroleum Exporting Countries was pumping at a steady rate of 29.6 million bpd in October.
The Paris-based agency said the cartel's sustainable capacity could reach 32.1 million bpd by the year-end and rise to 33 million bpd by the end of next year.
Most of the new oil would be lighter and sweeter crude.