LONDON: OPEC will have to produce a million barrels per day (bpd) more oil on average in the second half of 2014 to balance the global market, which will see a steep seasonal spike in demand, the West's energy agency said on Friday.
The International Energy Agency said in its monthly report it had raised its estimate of the demand for OPEC crude oil in the second half of this year by 150,000 bpd from its forecast last month to an average of 30.9 million bpd.
That is almost a million bpd day more than the group was producing in May, when its production rose by 85,000 bpd to 29.99 million bpd on the back of Saudi production increases offsetting declines in Libya.
Earlier this week OPEC agreed to keep its output targets unchanged until the next meeting in November at 30 million bpd.
The IEA said it was keeping its global oil demand growth forecast broadly unchanged from last month at 1.3 million bpd for 2014.
But the agency added that it expected a seasonal spike in demand to drive global oil use to a peak 94 million bpd in the fourth quarter of the year from a low of 91.4 million bpd in the first quarter.
"The loss of supplies from Iraq and Libya, where volumes have fallen below 100,000 bpd in early June from 1.4 million bpd a year ago, have combined to shift market attention to Saudi Arabia, the group's largest holder of spare capacity and widely acknowledged as the reliable 'central banker' of the oil market," the IEA said.
"'Effective' spare capacity was estimated at 3.31 million bpd, with Saudi Arabia holding 80 percent of the surplus volumes," it added.
The Saudi supply cushion is becoming particularly important as unrest mounts in Iraq, OPEC's second largest producer.
But the IEA downplayed concerns over the possible loss of oil supply from Iraq, where insurgents have taken several towns and cities this week.
"Concerning as the latest events in Iraq may be, they might not for now, if the conflict does not spread further, put additional Iraqi oil supplies immediately at risk," the IEA said.
The agency said it did not believe supplies along the Kirkuk crude oil pipeline to the Mediterranean would return to the market any time soon after being disrupted since early March. However, much larger supplies from the south of Iraq from the Gulf were probably safe for now, it said. (Reuters)