Oil demand to decline for second years in a row: IEA

16 January 2009

The ongoing economic slowdown is going to have a drastic impact on global oil consumption, according to an international thinktank. The International Energy Agency Friday cut its world oil demand forecast by one million barrels a day on expectations economic recession in various parts of the world will continue to squeeze energy consumption.

In its grimmest forecast on demand in years, the IEA said it expected 2009 global crude demand to contract 0.6 per cent after dropping 0.3 per cent last year, the first two-year dip in consumption since 1982 and 1983. The IEA forecast is based on expectations the world economy will grow by just 1.2 per cent in 2009 versus the International Monetary Fund's estimate in November of 2.1 per cent.

Forecast demand in the industrialized countries of the Organization for Economic Cooperation and Development (OECD) was cut by 530,000 barrels a day to 46.3 million barrels a day. Demand in developing countries, while revised down 480,000 barrels a day, will still expand 1.8 per cent to 38.9 million barrels a day, the IEA said.

''China's economy, in particular, appears to have sharply slowed down as its main export markets tumble,'' the report said. Chinese consumption is expected to climb 1.3 percent to 8 million barrels a day. That's 300,000 barrels a day less than previously forecast.

Crude demand globally is expected to average 85.3 million barrels a day this year, the IEA said in its widely watched monthly oil market report. Forecasters including OPEC, JPMorgan Chase & Co. and Deutsche Bank AG have already said demand will fall this year.

OPEC, responsible for more than 40 per cent of the world's oil, will have to provide about 29.9 million barrels a day this year to balance supply and demand, the IEA said, 900,000 barrels a day less than estimated in the previous report. The IEA also trimmed its forecast for supplies from outside OPEC next year by 30,000 barrels a day to 50 million barrels a day, leaving a growth rate of 1 per cent.