Oil demand to contract this year

11 December 2008

Paris-based, the International Energy Agency (IEA) said that it expects global oil demand to shrink in 2008 for the first time in 25 years as the world economy digs itself deeper into recession and cuts its forecast for demand next year also.

This is the fifth consecutive month that the IEA has cut its forecast and said it expects oil demand to decline by 2,00,000 barrels per day in 2008 to 85.8 million bpd and the global consumption of oil was 85.8 million barrels a day for the current year this year, which is 350,000 barrels a day less than forecasted by the agency last month.

''Global oil demand has been revised down in both 2008 and 2009, given a much starker contraction in the OECD than expected and early signs of weakness in non-OECD countries, notably in Asia,'' the IEA said in its monthly oil report, issued in Paris.

The agency said that this was the first drop in demand since 1983 and in percentage terms, oil demand in 2008 is expected to drop 0.2 percent from 2007.

IEA expects that the demand will increase 4,00,000 bpd a day or 0.5 percent to a downward adjusted 86.3 mb/d in 2009, which is based on the International Monetary Fund's report that the global economy will recover by the second half of 2009.

It also warns, that ''Should the recession prove to be more prolonged than expected, this prognosis could be further revised down,'' and global oil demand may fall next year if the economies of developing countries, like China and India also decline.