IEA sees world oil supplies staying tight to 2013

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London, Jul 1 : World oil supply will rise more slowly than expected by 2013, leaving little spare capacity on the market despite weaker demand growth, the International Energy Agency said on Tuesday.

In its Medium-Term Oil Market Report, the energy adviser to 27 industrialised countries said global supply capacity will reach 95.33 million barrels per day (bpd) by 2012, 2.7 million bpd less than its previous forecast a year ago.

The outlook comes as supply concerns and robust demand in Asia and the Middle East have helped drive crude oil prices to record highs above $140 a barrel, adding a strain to the world economy.

"Structural demand growth in developing countries and ongoing supply constraints continue to paint a tight market picture over the medium term," the Paris-based IEA said. High prices and slower economic growth are expected to weigh on world demand, although it is forecast to expand faster on average than additions to global supply in the next five years.

Consumption will rise by an average 1.6 % a year between 2008 and 2013, or some 1.5 million bpd on average, the IEA said. That is down from a previous medium term forecast of 2.2 %. Annual supply growth will match or exceed that level through 2010 but slow to less than 1 million bpd from 2011 to 2013. Average total supply growth in the period stands at 1.15 million bpd a year.

The IEA also said additional global refining capacity over the next five years would lag expectations, adding to the challenge of meeting rising demand for diesel and other distillate fuels.

Additions to capacity by 2012 are 1 million bpd less than last year's forecast. Accelerated declines at mature oilfields and long delays and cost overruns at new projects account for the lower supply growth forecast. The IEA, which has been steadily lowering its forecast for world oil demand during 2008 due to high prices and slowing economies, said the size of the cut to supply was unexpected.