IEA: oil recovery expected sooner

The International Energy Agency (IEA) believes global consumption of oil will recover faster than previously expected.

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Global consumption of oil will recover faster than previously expected, the International Energy Agency (IEA) said today, hours after Opec left output limits unchanged amid ambivalence about the state of the economy. The new report from the IEA, a Paris-based group of energy consuming nations, marks a change in the agency's outlook after months of pessimism about oil demand. The group increased forecasts for this year and next year by 500,000 barrels per day (bpd) and said demand was now expected to rise by 1.3 million bpd next year, after a decrease of 1.9 million bpd in 2009.

"There is growing evidence that the global economy may be finally stabilising, with industrial de-stocking coming to an end, coupled with the effects of large-scale government intervention," the IEA said. But the group warned that the forecast is clouded by unclear data from China, and the possibility of a "double-dip" recession that could push oil demand consumption down again later this year. At a meeting in Vienna that concluded late last night, Opec opted to maintain current output restrictions on its members' crude production. A deeper cut, however, could harm the economic recovery, officials said.

"Whilst there are signs that economic recovery is under way, there remains great concern about the magnitude and pace of this recovery," Opec said in its communique. "There has been some easing of the overhang in crude oil stocks but market fundamentals remain weak, refinery utilisation rates are low and product inventories have risen considerably." Abdulla el Badri, the Opec secretary general, said the group was not seeking a particular price band for crude and was wary of the potential for higher oil prices to prolong an economic crisis he compared with the Great Depression.