MADRID, July 1 (Xinhua) -- The International Energy Agency (IEA)warned on Tuesday of a tight oil market in the medium term till 2013, blaming market fundamentals rather than speculation for the record high prices.
In its annual medium term oil market report, which was presented here Tuesday, the Paris-based IEA said the oil market will remain tight in the medium term, although soaring prices and slower economic growth are reducing demand rise.
According to the IEA, global demand for oil products will grow by an average of 1.6 percent per year to 2013, from 86.9 million barrels per day this year to 94.1 million barrels per day.
The new estimates were scaled down from the agency's previous forecasts issued last July, which predicted a yearly increase of 2.2 percent to 2012.
The report said high oil prices are clearly affecting consumer behavior and threatening global economic growth, therefore contributing to the downgrade in demand growth.
"With oil prices hitting 140 U.S. dollars we are clearly in the third oil shock, with prices affecting economic growth, truck drivers are going on strike. Airlines are closing down," IEA Executive Director Nobuo Tanaka told a press conference on the sidelines of the World Petroleum Congress.
Meanwhile, the report said supply constraints, refinery limitations and continued demand growth in emerging markets will maintain pressure in the market over the medium term.
"Despite a considerable downward revision to our global oil demand forecast due to weaker economic growth projections and a doubling of oil prices over the past year, structural demand growth in developing countries and ongoing supply constraints continue to paint a tight market picture over the medium term," the report said.
Compared to the July forecasts, the IEA also made significant downward revisions to both non-OPEC supplies and OPEC capacity estimates, citing project delays and declining output from mature oil fields.
"Project delays remained a major factor in supply-side underperformance, with slippage estimated at up to twelve months on average for the large projects surveyed, alongside an estimated doubling of costs," the report said.
"Our findings highlight again the need for sustained, and indeed, increased investment both upstream and downstream -- to assure that the market is adequately supplied," said Tanaka.
The IEA predicted although the oil supply and demand would be close over the next five years, they would be in different pattern of development.
Contrary to supply trend, which was expected to maintain strength over the next 18 months and then lose steam, demand growth would be weakest in the first two years of the period, building up as global economic growth strengthens from 2010 on.
This would result in a temporary rise of spare capacity to above four million barrels a day in 2009 and 2010, before a retreat to minimal levels by 2013, the IEA estimated.
As the energy watchdog for the Organization for Economic Cooperation and Development (OECD), a grouping of the world's most industrialized countries, the IEA report blamed the current oil price hike on market fundamentals rather than speculation.
"OPEC production is at record highs and non-OPEC producers are working at full throttle, but stocks show no unusual build. These factors demonstrate that it is mainly fundamentals pushing up the price," Tanaka said.
Oil consuming countries, including many OECD members, have been arguing the oil price hike was mainly due to rising demand from emerging economies and insufficient supply, while oil producing countries said speculation and the weakening U.S. dollar were to blame.
The IEA report said demand growth would remain heavily concentrated in developing countries, where total consumption would nearly reach parity with mature economies by 2015.
By contrast, demand growth in OECD countries was expected to contract slightly over the next five years, according the report.
