IEA Raises World Oil Demand Forecast

Written By Luke Burgess

Posted April 19, 2010

Global oil demand is expected to hit a record high this year.

And investors couldn’t be happier.

That’s because this record demand may push oil prices over the $100 per barrel level again this year, despite the short-term after-effect of plunging oil prices after last week’s volcano eruption. Here’s why…

The energy experts at the International Energy Agency (IEA) have raised their forecast increase for 2010 world oil demand to 1.67 million barrels per day. This is up 100,000 barrels per day, as the world economy recovers from recession.

In its monthly Oil Market Report, the agency said total world oil demand will reach a stunning 86.60 million barrels per day this year — up 2% from 84.93 million in 2009.

In 2007, global crude demand hit a record 86.50 million barrels per day. That was before the onset of the global financial crisis and economic slowdown.

The IEA reports that this extra demand will have to be met by oil production from outside of OPEC. The agency increased its estimates for non-OPEC production this year by 220,000 barrels per day to approximately 52.0 million barrels per day. Overall, non-OPEC suppliers are expected to boost production by 500,000 barrels per day in 2010.

As a result, the IEA estimated demand in 2010 for OPEC oil will fall by 200,000 bpd to 29.1 million barrels per day.

Oil prices were largely steady after the IEA report, with benchmark U.S. crude oil futures for May trading around $85 per barrel last week.

The IEA noted that oil prices — which hit an 18-month high over $87 per barrel two weeks ago — had risen above the range of $60 to $80 per barrel that OPEC and many other industrialized countries see as ideal for producers and consumers.

The agency also said oil prices could stifle world economic growth if they were allowed to rise too far.

"Ultimately, things might turn messy for producers if $80-$100 per barrel is merely seen as the new $60-$80, stunting economic recovery while prompting resurgent non-oil and non-OPEC supply investment," the IEA report said.

Investors can prepare themselves for rising oil prices most directly with one of the many oil ETFs:

  • United States Oil Fund (NYSE: USO)
  • PowerShares DB Oil Fund (NYSE: DBO)
  • ProShares Ultra DJ-AIG Crude Oil ETF (NYSE: UCO)

Or if you’re looking for more leverage, there are several oil stock based ETFs, including:

  • Oil Services HOLDRS ETF (NYSE: OIH)
  • ProShares Ultra Oil & Gas Fund (NYSE: DIG)
  • SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP)

Still, investors can get even more leverage — and much higher profit potential — from my colleague Ian Cooper’s latest stock discovery. This opportunity is already being touted as the #1 oil play in the country.

Ian recently said of this play: "Since being upgraded this stock hit a high of nearly $15 — including a 233% gain in just over one year. We cashed out with a gain of over 103%… and now we’re ready to take our second round of profits."

You can learn more about how to get started investing in this stock today.

Good Investing,


Luke Burgess
Editor, Energy and Capital
Investment Director, Hard Money Millionaire

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