By SPENCER SWARTZ
LONDON—The International Energy Agency Wednesday said world oil markets will probably be better supplied than it previously expected over the next few years as new projects globally enter service and as crude demand grows at a slightly slower pace than in recent years.
"For the next few years, the oil market is marked by more comfortable spare [oil-production] capacity than envisaged last year," the Paris-based agency said in its annual medium-term outlook that charts energy trends from 2009 to 2015.
The report paints a picture of the global oil system that is, in the short term, expected to be under slightly less pressure as far as supply and demand go, but still faces longer-term problems that many oil traders and financial investors today cite as justification for bidding crude prices higher.
Front-month oil futures in New York recently traded down about 35 cents at $77.50 a barrel. Compared with a year earlier, oil prices are down about 2%.
Using a shaded approach, the IEA said global oil demand until 2015 could grow by 1% to 1.4% a year—below the 1.7% annual growth seen from 2000 to 2007—depending on factors like the pace of economic growth. Total demand is forecast at 90 million barrels a day to 92 million barrels a day by 2015 depending on the economic growth scenario.
Consumption is currently projected to average 86.5 million barrels a day globally this year. The agency's medium-term demand forecast is a fairly small 130,000 barrels a day higher than what it predicted in December.
The IEA is usually seen as one of the more reliable energy statisticians in the industry, in part because of the relatively high-quality data from its members, which include the U.S. and several other big energy-consuming countries. But IEA forecasts, like others in the industry, are subject to frequent revision, a point the agency acknowledged by saying its outlook "faces both downside and upside risks" hinging on various factors like the strength of post-recession economic growth.
Production from non-Organization of Petroleum Exporting Countries was revised up by 1 million barrels a day, with supply forecast to top 52.5 million barrels a day by 2015 due to output additions from places like Russia and Columbia. Many industry analysts are often pessimistic about non-OPEC supply as maturing conventional oil fields in places such as Mexico yield fewer hydrocarbons.
The IEA report also highlighted trends whose longer term impact aren't fully understood. The U.S., for instance, became unexpectedly the world's biggest natural-gas supplier last year as output of its huge, unconventional shale-gas reserves rose sharply.
This development has helped create a global natural-gas glut that has jammed gas prices sharply lower in many regions. But it is raising questions about the future economic viability of some renewable energy sources such as wind, which compete with natural gas in power generation.
When gas prices were much higher before the recession and America's shale-gas boom, the economics of building a wind-power turbine station made sense yet those economics could be thrown into doubt the longer the gas surplus persists. The IEA thinks a global gas surplus could extend "beyond" 2013 in some regions.
There are other uncertainties as well. OPEC is forecast to add almost 2 million barrels a day of net oil-pumping capacity by 2015. The problem though is that much of those supply additions may absorbed by OPEC states' fast-rising crude demand, which is accentuated by huge energy subsidies that promote wasteful consumption.
The IEA estimates 70% of the expected growth in Middle East OPEC oil-production capacity will be gobbled up by the region's oil demand, raising questions about the adequacy of current spending by OPEC states in new output capacity.
OPEC spare production capacity, a back-up reserve used to plug any unexpected supply disruption, is forecast at 3.5 million barrels a day by 2015, down some 2 million barrels a day from current levels but still around double what OPEC had on hand two years ago when crude prices spiked to $147 a barrel.
Write to Spencer Swartz at spencer.swartz@dowjones.com
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