Peak Oil News - EIA predicts 700,000 barrels/day shortfall in fourth quarter 2005

The federal Energy Information Administration on Thursday again raised its forecasts for Chinese oil demand, changes that boosted the outlook for world oil consumption as a whole.

The upward revisions in the EIA's monthly oil-market outlook reinforce how demand - already so strong that it has pushed producers and refiners to the limits of their capacity - continues to grow robustly despite soaring prices.

The agency raised its forecast for demand in the fourth quarter by 200,000 barrels a day, to 86.8 million barrels a day. Demand in that quarter was already expected to test producers' ability to pump more oil. The new forecast leaves fourth quarter demand 700,000 barrels a day over projected supply.

UPDATE: EIA Raises Forecasts For China, World Oil Demand

(Updates to add increase to 1Q 2006 oil demand.)

NEW YORK -(Dow Jones)- The federal Energy Information Administration on Thursday again raised its forecasts for Chinese oil demand, changes that boosted the outlook for world oil consumption as a whole.

The upward revisions in the EIA's monthly oil-market outlook reinforce how demand - already so strong that it has pushed producers and refiners to the limits of their capacity - continues to grow robustly despite soaring prices.

Acknowledging the pressure demand is putting on markets, the EIA, the statistics arm of the U.S. Department of Energy, now sees U.S. benchmark oil prices holding above $50 a barrel through 2006.

"Several factors have contributed to the recent high crude oil prices and are likely to keep prices at or near present highs," the EIA wrote. "First, worldwide petroleum demand growth is projected to remain robust, despite high oil prices."

While Chinese oil demand - like overall world consumption - isn't expected to grow as fast as it did in 2004, it is seen growing faster than expected early this year. The EIA revised its forecasts for Chinese oil demand in the second and fourth quarters up by 100,000 barrels a day in each case, to 7.4 million and 7.7 million barrels a day, respectively.

The agency left its outlook for full-year Chinese demand and demand growth unchanged.

In line with those increases, the EIA boosted its forecasts for second and third quarter world oil demand by 100,000 barrels a day, to 83.1 million and 84.6 million barrels a day, respectively.

The agency raised its forecast for demand in the fourth quarter by 200,000 barrels a day, to 86.8 million barrels a day. Demand in that quarter was already expected to test producers' ability to pump more oil. The new forecast leaves fourth quarter demand 700,000 barrels a day over projected supply.

And the stress won't end this year. The EIA also raised its forecast for first quarter 2006 oil demand by 300,000 barrels a day, to 86.9 million barrels a day, slightly pulling up the outlook for demand growth that year.

"Projections for 2005 and 2006 call for worldwide growth averaging 2.2 million barrels per day, or 2.6 percent, per year, down from the 3.4-percent growth in 2004," the EIA said.

Weaker than expected demand for gasoline in the U.S. this summer was the exception to the EIA's upward revision. The EIA now sees gasoline demand of 9.34 million barrels a day in the third quarter, 80,000 barrels a day below its previous forecast. The change pulled the forecast for overall U.S. oil demand in the quarter down by 30,000 barrels a day, to 20.95 million barrels a day.

Nevertheless, growth in gasoline demand will be strong enough to push prices to new records, with the EIA forecasting summer prices of $2.28 a gallon on average from April to September, up 38 cents from last summer.

"Despite high prices, demand is expected to continue to rise due to the increasing number of drivers and vehicles and increasing per-capita vehicle miles traveled," the EIA said.

-By Andrew Dowell, Dow Jones Newswires; 201-938-4430; andrew.dowell@ dowjones.com

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