IEA Cuts 2009 Oil Demand Forecast

The adviser to 28 nations trimmed its 2009 forecast by 570,000 barrels to 84.7 million a day because of a weaker economic outlook from the International Monetary Fund.

The agency warned slipping investment in capacity may cause a price rebound that "could again destabilise the global economy."

"We've been following the downward spiral in economic expectations," said David Fyfe, head of the IEA's oil industry and markets division. "We're on a downward escalator in terms of economic expectations, but at the same time the supply side is being hit."

Global crude demand will shrink this year by 1.1 per cent. The biggest revision was made to the world's most developed economies in the Organisation for Economic Cooperation and Development. The IEA cut demand expectations there 340,000 barrels a day to 46 million barrels a day, implying a contraction of 1.5 millions barrel a day, or 3.2 per cent.

The IEA trimmed its forecast for supplies from outside the Organisation of Petroleum Exporting Countries next year by 110,000 barrels a day to 50.9 million barrels a day. The total now includes one million barrels a day from Indonesia, which left OPEC at the start of the year.

While non-OPEC supply is still projected to increase 400,000 barrels a day from last year, the IEA's Fyfe said the downward revision "could well go further into 2009 if spending cuts have an immediate impact on drilling."

OPEC, responsible for more than 40 per cent of the world's oil, will have to provide about 28.8 million barrels a day this year to balance supply and demand, the IEA said.

Author: Ksenia Kochneva