International
Energy Agency
Warns Of Energy Crisis
By Bruce Stanley
13 May, 2004
stltoday.com
LONDON
- Demand for oil is growing at its highest rate in eight years, but
the economic recovery could fizzle unless suppliers drill new wells
and produce additional crude, the International Energy Agency said Wednesday.
With crude-oil prices
soaring, OPEC, which pumps about a third of the world's oil, announced
plans for talks next week to consider a Saudi Arabian proposal that
the group raise its production ceiling in a bid to cool the market.
In trading Wednesday
in New York, June crude futures touched $40.92 a barrel and settled
up 71 cents, or 1.8 percent, at $40.77, the highest close on the New
York Mercantile Exchange since futures began trading in 1983.
Oil-futures contracts
last traded above $40 a barrel in the fall of 1990 ahead of the Gulf
War.
The growth in demand
for crude continues to outstrip expectations, the Paris-based energy
agency said in its monthly oil market report.
Given China's thirst
for imported oil and the soaring demand for gasoline and jet fuel in
industrialized countries, the agency revised its 2004 demand forecast
upward to 80.6 million barrels a day - an increase of 2.5 percent over
last year. World demand hasn't risen this fast since 1996, the agency
said.
The agency is the
energy watchdog for 26 wealthy, oil-importing countries. Although it
analyzes the supply and demand for crude, it avoids trying to predict
prices.
Reviewing the price
surge of recent months, the energy agency said that geopolitical concerns
in the Middle East, bottlenecks in U.S. gasoline markets and an increase
in speculative buying of oil futures contracts all have had an effect.
Most important,
however, has been the stingy output from the 11-member Organization
of Petroleum Exporting Countries. By forcing importers to run down their
oil inventories, OPEC has been the decisive factor in creating "a
market on steroids," the energy agency argued.
The agency noted
that higher demand for oil is a sign of a rebounding world economy.
"But this welcome resurgence in economic activity brings to the
fore the issue of securing the necessary supplies to sustain the recovery,"
it said.
The agency urged
suppliers to boost investment in exploration for oil and called on refiners
to increase their production capacity for gasoline and other refined
products.
"That's really
a critical point," said Jim Placke of Cambridge Energy Research
Associates in Washington. "If you don't start going out to explore
for and produce new resources, (then) 3 to 5 years from now when you
need them they're not going to be there."
Many OPEC members
already are pumping all they can to cash in on current high prices.
Saudi Arabia, OPEC's
de facto leader, is the only member with significant capacity to pump
more oil from existing fields. On Monday, Saudi Oil Minister Ali Naimi
proposed that the group consider raising its production target by 6
percent, to 25 million barrels a day.
Although Algerian
Minister of Energy and Mines Chakib Khelil argued against an increase,
his Kuwaiti counterpart, Sheik Ahmed Fahd Al Ahmed Al Sabah, said Wednesday
that Kuwait would raise production to its maximum capacity to try to
nudge prices lower. Al Sabah advised other OPEC members to do the same.
"The organization
seems to have been stung into making reassuring noises," the International
Energy Agency concluded.
As if to confirm
this view, OPEC President Purnomo Yusgiantoro said Wednesday that the
group would hold informal talks next week to consider the desirability
of increasing its production target as part of its "continuous
commitment toward market stability."
He said that OPEC's
representatives would meet on the sidelines of the International Energy
Forum, an industry conference to be held May 22-24 in Amsterdam. He
added that OPEC pumped 2 million barrels above its target in April.
"We have not
discouraged our members from producing more because we want to do everything
we can to stabilize prices. That is one of the cardinal objectives of
our organization," he said.
The International
Energy Agency reported a similar level of quota-busting, but it noted
that Saudi Arabia and six other OPEC members had trimmed production
last month in an effort to comply with individual targets.