Oil demand to shrink by 500,000 bpd says IEA
London, January 16, 2009
World oil demand will contract sharply in 2009 as the global economic slowdown further erodes consumption, the International Energy Agency (IEA) said on Friday.
The Paris-based agency joined the ranks of forecasters predicting a fall in global oil demand this year, revising its previous 2009 estimate down by 940,000 barrels per day (bpd) to 85.3 million bpd - a 500,000 bpd year-on-year fall.
'Forecast global oil demand has been sharply revised down for 2009, following a reassessment of global economic prospects,' the adviser to industrialised nations said in its monthly report.
'Global GDP growth has been roughly halved to 1.2 percent, given the worsening outlook in OECD and non-OECD countries alike. The expected two-year contraction in oil demand will be the first since the early 1980s.'
The IEA's 940,000 bpd revision to its 2009 estimate is the biggest single month's revision in recent times, David Fyfe, head of the IEA's Oil Industry & Markets Division, told Reuters.
In its previous report, the IEA forecast global oil demand would fall in 2008, but recover in 2009, based on the resilience of emerging economies.
However, the agency now sees Chinese oil demand growth at just 90,000 bpd in 2009, as its GDP growth is seen slowing to 6.5 percent - the slowest rate in eight years.
Reflecting the speed of the world slowdown, the IEA has taken the step of pre-empting further revisions to global economic growth projections from the International Monetary Fund and other agencies, on which it bases its assumptions.
'It's really become obvious since our last report that the major institutions have been flagging a downgrade to economic growth forecasts for 2009,' said David Fyfe at the IEA.
'We've taken a robust approach this month, but you can never say never in terms of the risks,' he observed.
As demand drops amid the current economic slowdown, oil inventories in the Organisation for Economic Co-operation and Development (OECD) have remained at high levels.
Stocks at the end of November equalled 56.4 days of cover, compared with 56.8 days at the end of October.
The IEA said production cuts by the Organization of the Petroleum Exporting Countries (OPEC), which total 4.2 million bpd since September, could reduce stockpiles as the producer group's current output targets are lower than projected demand for its crude oil.
'Opec's production target looks to us to be below the underlying 'call' for 2009,' the IEA said.
'Commercial inventory could therefore tighten, even while spare capacity increases, albeit Q4 stocks are starting from a high base at 56 days plus of forward cover.'
The IEA sees the demand for OPEC crude at between 29.5 and 30 million bpd in 2009. If the producer group succeeds in hitting its reduced production targets, output from all 13 OPEC members should total 28.2 million bpd, the IEA said.
However the agency added that the estimated 50-80 million barrels of oil which is in floating storage due to the slowdown in demand, could hamper OPEC's ability to reduce the stock overhang.-Reuters