(LONDON) The International Energy Agency, an adviser to 27 industrialised nations, cut its forecast for 2008 global oil demand because of the slowing US economy and said the underlying trend was ‘even weaker’.
The agency reduced its forecast for demand this year by 200,000 barrels a day to 87.6 million barrels a day. That lowers the annual growth rate to 1.9 per cent, down from 2.3 per cent in last month’s Oil Market Report.
‘The economic environment is clearly paramount,’ the Paris-based agency said yesterday in its report. ‘An economic slowdown has the potential to change the landscape over the next few years: depending on how deep it is and how long it lasts.’
Global growth may slow to its weakest pace since 2003 this year as the US credit crisis spreads through the world’s largest economy, the International Monetary Fund said in its latest economic report. The US economy lost 17,000 jobs in January, the first drop in more than four years.
Global oil demand will be 88 million barrels a day in the first quarter of 2008, 170,000 barrels a day less than last month’s forecast, the IEA said.
‘We are watching carefully the US economy and how other international organisations see the situation,’ IEA executive director Nobuo Tanaka told reporters at an energy conference in Houston on Tuesday. The ‘downward trend is a major reason for this’.
Supply from the Organisation of Petroleum Exporting Countries, whose members produce more than 40 per cent of the world’s crude, will need to average 31.8 million barrels a day this year in order to balance global demand, 100,000 barrels a day more than last month’s estimate, the report said.
Opec, scheduled to meet on March 5, held quotas unchanged at its meeting in Vienna earlier this month.
Officials said the group may cut crude production should slowing economies in the US and Europe threaten energy demand.
Crude prices have averaged more than US$90 so far this month in New York and would have to drop to around US$80 a barrel for Opec to act, Opec officials said last week.
The group pumped 32 million barrels a day in January, according to the IEA. Opec’s installed crude capacity is currently at 35 million barrels a day, an increase of 300,000 barrels a day from last month, thanks to revisions for Angola and Persian Gulf producers, the report said.
Global oil supply averaged 87.2 million barrels a day in January, an increase of about 750,000 a day from December, the IEA said.
New output from Brazil and the assumed recovery of production from December outages in Azerbaijan, Mexico and China led to the increase, according to the report.
Crude oil traded little changed yesterday after IEA made the forecast.
Petroleos de Venezuela SA, the state oil company, cut off sales of crude and fuel to Exxon Mobil Corp in retaliation for the freezing of US$12 billion in assets in a legal dispute.
‘The IEA had been over-estimating demand all over last year,’ said Oliver Jakob, managing director of Swiss firm Petromatrix. ‘They were way above everyone else, and now the slowdown in the US economy is another reason why they have further corrections to make.’
Crude oil for March delivery traded at US$92.89 a barrel, up 11 cents, on the New York Mercantile Exchange at 9.48am London time yesterday. On Tuesday, the contract fell 81 cents, or 0.9 per cent, to US $92.78 a barrel.
Source: Bloomberg (Business Times 14 Feb 08)