The International Energy Agency Wednesday slightly revised up its forecast for world oil demand on improved Asian economic activity, but said countries like Russia are pumping more crude that will offset the added rise in consumption.

In its widely-watched monthly oil market report, the Paris-based agency said it expects 2009 global oil consumption, led by growth in China, to average 83.94 million barrels a day.
That represents an upward revision of 190,000 barrels a day from the IEA’s July report, but is still a 2.7% drop from last year. Global demand under the new outlook is on par with 2005 levels, underlining how tepid consumption remains.
The world also has plenty of oil at its disposal, the IEA said, with non-Organization of Petroleum Exporting Countries producing more supply and with inventory of distillates and other oil-products still brimming at multiyear highs. Russia and other non-OPEC nations, which produce about six out of 10 barrels consumed daily globally, are expected to churn out around 160,000 barrels a day more this year than previously expected.
“We have Russia surprising to the upside, which is pretty much canceling out the upward demand revision,” said David Fyfe, editor of the IEA report.
U.S. oil prices, pushed higher recently on rising stock markets and optimism about economic recovery, traded Wednesday around 20 cents lower at $69.25 at 0842 GMT after shedding $1 Tuesday.
Since January, the IEA has revised up its outlook on supply from Russia, the world’s biggest oil producer, by a total of 360,000 barrels a day as some new fields in Western Siberia enter service and as enhanced oil recovery techniques squeeze out more hydrocarbons from existing fields.
But how sustainable those output gains are from non-OPEC producers is an open question. The IEA, energy watchdog to big energy-consuming nations like the U.S., is more optimistic on those producers than other industry forecasters.
Russia suffered its first drop in oil production in a decade in 2008 and analysts think harsh fiscal terms and tax policies on foreign companies have dealt a prolonged blow to exploration efforts that will undermine output over the next year or so, if not longer.
Some analysts think Russia will pump around 9.7 to 9.8 million barrels a day on average this year, rather than the 10.07 million barrels a day expected by the IEA.
The agency expects global crude demand to rise 1.6% next year -- marginally higher than its previous outlook - and outpacing non-OPEC supply growth of about 1% in 2010.
The amount of crude inventory packed away in storage and tankers shows no real sign of easing. Inventory in countries like the U.S., as measured by what is known as forward demand cover, stood at 61.7 days in June. That is unchanged from May and 8.0 days above the five-year average.
(Source: The WSJ)