The International Energy Agency (IEA) on Friday cut its oil demand growth forecast for 2008 to the lowest rate in 15 years, citing economic weakness and “a spiraling liquidity crisis.”
In a monthly report, the agency, adviser to 28 industrialized countries, reduced its 2008 demand growth forecast by 250,000 barrels per day (bpd) to 440,000 bpd. This represents a 0.5% growth rate -- the lowest in percentage terms since 1993. The report adds to evidence slowing economies and the worsening financial crisis are reducing oil consumption. Oil prices fell further after it was released to a one-year low near $81 a barrel.
But the IEA cautioned against too much focus on demand, saying the credit crisis would also impact investment in bringing on new oil supply. Already, world output fell by more than 1 million bpd in September partly because of storm disruption in the US Gulf, it said. “The key message is the downward adjustments in the demand numbers in line with the weaker economic prognosis,” IEA analyst David Fyfe told Reuters. “But we’ve also lost quite a lot of oil on the supply side in recent months.”
World oil demand is expected to average 86.5 million bpd in 2008. The agency also lowered its growth forecast for 2009 as well, cutting the prediction by 190,000 bpd to 690,000 bpd.
The Paris-based agency said the impact of global economic weakness was most acute in developed countries while developing economies were showing “a degree of resilience.” “Although non-OECD slowdown is also likely, it is by no means certain that growth will be choked off altogether,” it said. “We have yet to see unambiguous evidence of a sharp slowdown in China, while Middle Eastern demand growth remains robust.”
The IEA, which has long warned investment in new oilfields and refineries was inadequate, said the credit crisis had made matters worse. “Credit shortages are rapidly becoming yet another in a long line of impediments to industry investment,” it said. In particular, it said investment was already being affected in highly-leveraged companies in the Caspian and in Russia, the world’s biggest non-OPEC oil exporter.
The agency cut its forecast for supply outside OPEC this year, citing lower production at a field in Azerbaijan and the impact of storm disruption on Gulf of Mexico energy installations. As a result, 2008 non-OPEC oil output growth has been almost wiped out to an average of only 150,000 bpd. The IEA also trimmed the supply forecast for 2009, predicting growth of 655,000 bpd.
OPEC has also been pumping fewer barrels, reducing output by 300,000 bpd to 32.3 million bpd last month. The IEA said that was more the result of outages in Angola, Iraq and Nigeria than deliberate cutbacks. At its September meeting, the Organization of the Petroleum Exporting Countries said it would trim about 500,000 bpd of output it was pumping above agreed targets.
In response to deep price falls this week, several OPEC ministers said supply should be cut further and the group has called an extra emergency meeting on Nov. 18 in Vienna to discuss the impact of the financial crisis. OPEC had not been expected to meet again until a Dec. 17 gathering in Algeria. (Reuters)