Barclays say IEA too bearish on oil demand

The IEA remains too bearish on its outlook for oil demand in 2009 and has overlooked US industrial output that will boost consumption in the coming months, Barclays PLC said.

The IEA, energy advisor to the Organization for Economic Cooperation and Development, Wednesday raised its forecast for global oil demand after increasing the estimate for the second quarter. By maintaining its prediction for the latter half of 2009, the IEA isn’t accounting for signs of an economic recovery in the US the largest oil consuming nation, Barclays Capital commodities research analysts led by Paul Horsnell said in a weekly report.

“The potential for some strong demand signs in the middle of the demand barrel is one reason we continue to believe the International Energy Agency is still being far too bearish on 2009 demand,” the analysts said, referring to increased demand for transportation fuels, including diesel.

Oil rose Wednesday for the first day in five, climbing above US$70 a barrel in New York, after the IEA raised its consumption forecasts for this year and next.

Demand will average 83.9 million barrels a day in 2009, 180,000 barrels or 0.2% more than previously estimated, the Paris-based agency, adviser to 28 nations including Japan and Germany, said in its monthly Oil Market Report.

This includes a 0.7%, or 570,000 barrel-a-day, increase for the second quarter and a 0.1% revision for each of the other three quarters.

The U.S., which consumes almost a quarter of the world’s oil, emerged from a recession in June and will expand 3.5% in the third quarter after a 1% decline in the second, according to Barclays.

“Higher industrial output, higher final sales and private consumption combined with a lower rate of inventory decline is a recipe for more goods moving around the U.S. economy,” the analysts said.

Oil demand worldwide will rise in the second half of 2009 by about 300,000 barrels a day, according to the IEA, far less than a 1.8 million barrel-a-day forecast by the Organization of Petroleum Exporting Countries and a 1.9 million barrel-a-day prediction by the U.S. Energy Department. Barclays pegs the increase at 2.1 million barrels a day.

“We are forecasting an upswing in global oil demand from the second quarter into the fourth quarter that is seven times larger than the forecast of the International Energy Agency, and we still see upside risk in our forecast,” according to London-based Horsnell.

The IEA should “have a very hard look at the shape of their demand numbers, because we believe they run the risk of confusing the market with the current forecasts.”