IEA sees strong global oil demand growth to 2011

LONDON, July 12 (Reuters) World oil demand will rise more quickly in the years to 2011 than in the past decade as high prices fail to derail growth in China and India, the International Energy Agency (IEA) said on Wednesday.

Global demand will rise on average by 1.8 million barrels per day, or 2 percent, a year to reach 93.7 million bpd in 2011, the adviser to 26 industrialised countries said. Average annual demand grew by 1.8 percent in the past decade.

''You are still seeing high prices restrain demand,'' said Lawrence Eagles, head of the IEA's Oil Industry and Markets division. ''But there are a number of large developing countries such as China that have reached a threshold level of income in which oil demand starts to take off.'' The outlook suggests oil demand will accelerate in coming years despite surging crude prices, which hit a record .78 last week.

Oil is up from in 2002 as rising demand led by the United States and China strains supply.

Demand would be stronger with lower prices. The IEA's forecast is at the bottom end of a December 2005 estimated range putting consumption growth at 1.8 million to 2 million bpd from 2007 to 2010.

''Current and assumed higher prices have essentially lowered average growth by over 200,000 bpd from (that) projected in the autumn of 2005,'' the report said.

The IEA gave the forecast in its Medium Term Oil Market Report, a new annual publication released on Wednesday.

SUPPLY GROWTH While supply from countries outside the 11-member Organization of the Petroleum Exporting Countries will rise, dependence on OPEC will grow in the years ahead.

Demand for OPEC crude, or the call on OPEC, will rise to 30.2 million bpd in 2011 from 28.8 million bpd in 2006, according to the report.

Non-OPEC supply will increase by an average 1.1 million bpd to 56.7 million bpd by 2011, as new oil from regions such as the former Soviet Union offsets a decline in Europe, the IEA said.

Supply growth outside OPEC has lagged forecasts in recent years, such as when hurricanes damaged oil and gas production platforms in the Gulf of Mexico last year.

The IEA said its supply forecast was more likely to be too high than too low.

''Although high prices and modular development could bring some projects slightly forward, the downside risks to the supply side are considerably higher,'' the report said.

Oilfield developments in OPEC countries will increase the group's production capacity, the report said, potentially easing the strain on supplies that has helped boost prices.

OPEC's sustainable capacity could rise to 36.3 million bpd in 2011 from an average 33 million this year, led by top world exporter Saudi Arabia.

The IEA assumes no capacity boost in Iraq, where violence has slowed development of the country's oil.

Venezuela, where President Hugo Chavez has rattled oil markets with anti-capitalist talk, higher royalties and oilfield takeovers, is also assumed to post no capacity growth.

REUTERS PV RS1502