2005 world oil demand development

Looking at the events that have created an exceptional oil and tanker market so far for 2004, featuring record oil prices, surging demand and VLCC rates averaging close to USD 70,000 per day, it is a difficult task to make projections for 2005.
Going back one year, in its August 2003 oil market report, the International Energy Agency (IEA) predicted that 2004 world oil demand would grow by a modest 1.1 mbd (or 1.3% over 2003) - about the same growth pattern as in 2003 - with the growth in oil demand predicted to be met by a corresponding growth in non-OPEC oil production leaving no room for OPEC growth. 
It turns out that 2004 world oil demand is likely to grow by more than twice that forecast, or 2.5 mbd (3.2% up compared to 2003). Demand growth in North America, China, other Asia and Europe is more than twice as high as the August 2003 predictions for 2004. China's oil imports rose by almost 40% to 61 M tonnes in the first six months of this year, official figures revealed. 
The graph below shows quarterly world oil demand development, comparing the 2003 actual with the August 2003 and July 2004 estimates for 2004, and the July 2004 prediction for 2005.


The graph below shows the world oil demand growth in mbd according to region for 2003-2005.


It goes without saying that the 2005 oil market must be viewed with caution. The IEA predicts world oil demand to grow by 1.8 mbd in 2005 or 2.2% over 2004, a slowdown on the 2004 growth but higher than the 2003 growth. Despite the current high oil prices, oil consumption is still being forecast as continuing to grow. Other forecasts also predict growth ranging from 1.4 to 2.4 mbd with an average amongst these of about 1.8 mbd. In its assumptions, the IEA expects that the world economy will continue to expand at about 4%. Uncertainties regarding the pace of this development exist, in particular surrounding the sustainability of Chinese and U.S. growth.

: Jan Svenne or Erik Ranheim