IEA trims 2011 oil use growth estimate, sees risks-UPDATE 3

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Friday September 10, 2010 08:14:11 AM GMT

* IEA cuts 2011 oil demand estimate by 50,000 bpd

* IEA says oil market very well supplied

* Monthly report highlights near record industry oil stocks

* OECD oil stocks rise to 61.4 days of forward cover in July

(Adds link to table at bottom of story)

By Christopher Johnson

LONDON, Sept 10 (Reuters) - World oil demand will keep rising as the economy expands but the increase in fuel consumption will be lower in 2011 than 2010 and demand could be a lot weaker if global growth slows, the IEA said on Friday.

Highlighting near record industry oil stocks in developed economies, the International Energy Agency said in its monthly oil market report global oil supply was more than sufficient to meet current and expected demand over the next year.

"By any measure we have a very well supplied market," said David Fyfe, head of the IEA's oil industry and markets division.

"There is a significant cushion of oil supply to cope with unforeseen changes and the risks are very much to the downside."

"If the world economy slows, oil demand could be quite a bit lower," he added.

The IEA, which advises major industrial countries on energy policy, said global oil demand would average around 86.62 million barrels per day (bpd) in 2010, almost a 1.9 million bpd increase year-on-year, which was 40,000 bpd higher than previously estimated.

In 2011, consumption is forecast to rise to 87.89 million bpd, up almost 1.3 million bpd year-on-year. It said demand growth next year would be 50,000 bpd lower than last month's estimate.

NEAR RECORD STOCKS

The IEA raised its estimate of 2010 demand for crude oil from the Organization of the Petroleum Exporting Countries by around 100,000 bpd to 28.9 million bpd, saying consumption had risen a little in many areas including several developed economies and in the Asia-Pacific region.

But oil stocks were at very high levels.

Oil stocks in the developed economies of the Organisation for Economic Co-operation and Development (OECD) had risen to the equivalent of 61.4 days of forward demand by the end of July, from 61.0 days at the end of June.

OECD industry stocks rose 19.0 million barrels to 2.785 billion barrels in July to near record high levels recorded in 1998, it said.

Preliminary data suggested there had been another build in OECD oil stocks in August, Fyfe said.

David Hufton, managing director of oil brokers PVM Oil Associates in London, said the overall tone of the IEA report sounded pessimistic.

"The evidence is building that supply exceeds demand," Hufton said.

Oil prices have been relatively stable over the last year, mostly trading between $70 and $80 per barrel. Benchmark U.S. crude oil futures for October were around $75.90 at 0940 GMT on Friday.

Fyfe said the IEA was assuming a fairly optimistic outlook for global economic growth in its oil market forecasts but that the picture could worsen if world growth was less than expected.

"If we really got quite a marked slowdown in the global economy, let us say with economic growth closer to 3 percent than 4.5 percent over the next 18 months, it could knock around 1 million bpd or so off next year's oil demand," he said.

The IEA said OPEC crude oil production fell slightly in August, down by 60,000 bpd to 29.15 million bpd, and production from the 11 OPEC members with output targets, all except Iraq, averaged 26.83 million bpd last month.

Relative to its targeted production cuts, OPEC compliance rates were unchanged at 53 percent in August, it said. (Editing by James Jukwey)

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