China to pump up oil demand

THE world oil market supply crunch looks set to continue well into next year with another strong jump in demand on the back of the rampant Chinese economy.

With China set to suck in 8% more crude, the International Energy Agency predicts a global jump of 1.8m barrels a day in 2005. That would be below this year's 24-year record, but on a par with 2003.

Rob Laughlin, analyst at GNI Man Financial, said: 'Opec is going to have to pump, pump and pump some more. There'll be another year of relatively high oil prices. But, of course, the higher the price goes the more oil will be found in the next six to 12 months.'

The IEA's Oil Market Report believes non-Opec supply will grow by 1.2m barrels a day, the lion's share coming from the former Soviet Union, followed by Angola and Brazil.

Opec production, excluding Iraq, averaged 26.9m barrels a day in June, some 1.4m above the cartel's current quota. The IEA puts spare Opec capacity at just over 600,000 barrels a day.

Analysts expect Brent crude to average $28 a barrel next year. Today, it fell 33 cents to $36.30, which the City put down to profit taking.

A 500,000 barrels-a-day increase in Opec's quota is expected to come into effect on 1 August as the cartel looks to ease supply concerns that recently pushed world oil prices beyond $40.

Including Iraq, Opec production hit 28.6m barrels a day last month, its highest since November 2000.