The International Energy Agency has increased its oil demand forecast for this year to 29.8m barrels per day (bpd), up 200,000 from its previous estimate.
However, it has warned against supply shortages from Iraq and Libya and cut its forecast for growth in demand for 2014 by 100,000 bpd to 1.11m bpd.
Protests in Libya saw production fall to 400,000 bpd at the begnning of August, compared to 1m bpd in July. And supply in Iraq fell below 3m bpd for the first time in five months in July after repeated bomb attacks on a major pipeline running 900km from Nineveh to Turkey's Ceyhan port on the Mediterranean reduced flow from 1.6m bpd to 500,000 bpd. Iraq's oil output is expected to fall a further 500,000 bpd in September as infrastructure work takes place to repair the pipeliine.
But it's not all doom and gloom. Saudia Arabia's oil production rose to its highest point in a year.
And strong supply growth from non-OPEC producers could mitigate any supply issues, with non-OPEC supplies growing 1.0 per cent in July to 54.9m bpd, and forecast to hit 55.4m bpd in the fourth quarter of the year.
North America accounted for 40 per cent of this growth, and is forecast to increase output by 1.4m bpd in the second half of the year compared to the year before. In particular, shale oil was identified as a "defining feature of tomorrow's market", potentially forcing OPEC producers to pull back supply in the future.
The producer group, ineluctably faces the test of having to rein in supply and accommodate rising volumes of shale oil – unless falling prices curb shale oil production first.