Chinese thirst drives oil demand,Europe clouds outlook: IEA

Economic recovery is raising global oil demand amid uncertainty over how sovereign debt crises in Europe might crimp pivotal Chinese growth,the IEA said.

Economic recovery is raising global oil demand amid uncertainty over how sovereign debt crises in Europe might crimp pivotal Chinese growth,the IEA said today.

The International Energy Agency (IEA) also said that the BP oil-spill in the Gulf of Mexico could lead to a tightening of regulations and crimp supplies,but this would not necessarily be a swansong for offshore development.

History suggested that even a regulatory clamp down might not obstruct exploration,and development from deepwater fields.

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It was not yet clear whether the Deepwater Horizon rig disaster would become a defining moment for broader US energy policy and for offshore oil and gas development worldwide. Analysts had rushed to estimate how much deepwater production was at risk and the IEAs tentative view was up to 300,000 barrels per day by 2015. Authorities in the United States,Britain,Norway,Brazil,Canada and China were reviewing their procedures,although any changes in US regulations might not be transferable elsewhere,nor amount to a swansong for offshore expansion. It said: The government may try to harness changing public sentiment behind legislation aimed at weaning the US away from oil use,and mitigating climate change. The agency recalled that Britain enacted more than 100 new safety procedures after the Piper Alpha incident in the North Sea in 1988,and separated regulation of field licensing from operational safety,an example the US is now belatedly following. In Britain,the considered response (to tighter rules) nonetheless allowed scores of new offshore fields to be developed in the subsequent decade,generating over 300,000 barrels per day of incremental offshore supply. The IEA said that the long-term impact of the Deepwater Horizon spill might turn on whether negligence by operators or regulators was the key cause which might have a lesser effect than if the main problem turned out to be operating procedures and regulatory structures.

The IEA said in its monthly review of trends in the oil market,that the two key factors which could upset estimates for the price of oil were strains over sovereign debt in advanced countries and the pace of growth in China.

The agency revised up its estimate of global demand by 60,000 barrels per day to 86.4 mbd this year.

It now expected demand from the 31 advanced countries in the area covered by Organisation for Economic Cooperation and Development to recover from depressed levels in 2009 by 0.2 per cent or 70,000 barrels per day,marking an increase of 80,000 barrels a day from its curtailed estimate last month.