WTI, Brent climb after IEA report

A report from the International Energy Agency (IEA) has called for the Organisation of Petroleum Exporting Countries (OPEC) to increase production in order to relieve market tightness going forward.

The agency says that world oil demand growth will increase to 2.5% in 2008 to 88.2 million barrels per day (bpd). The IEA's 2008 estimate represents an increase of 2.2 million barrels a day, from 2007's revised level of 86 million barrels a day.

Non-OPEC supply is expected to reach 51 million bpd in 2008, while OPEC capacity is expected to rise by 1 million bpd in 2008 to 35.4 million bpd. OPEC controls approximately 43% of global oil production.

"The obvious consequence is an increased need for OPEC crude," said Barclays Capital in a research note.

The news saw ICE August Brent later trade up at $77.30/bbl. Nymex West Texas Intermediate for August delivery gained $1.43 to close at $73.93 a barrel on the New York Mercantile Exchange, having climbed as high as $74 during the trading session, its highest level since Sept. 5, 2006. The contract hit an all time high of $78.40/bbl in July 2006.

“With these indicators it appears that the ball is firmly in OPEC's court for an output change decision. With each additional day that OPEC crude is withheld, fundamental tightness should continue to translate itself to support for prices,” noted Edward Morse, chief energy economist at Lehman Brothers, in a report published today.