OilVoice - IEA Predicts “Lower-Than-Expected” Fall in 2009 Global Demand

IEA Predicts “Lower-Than-Expected” Fall in 2009 Global Demand

Thursday, June 11, 2009

Global demand for crude oil in 2009 will narrow by less than previously expected, according to the International Energy Agency (IEA) on Thursday, after raising its demand forecast for the first time since August last year.

The agency, which advised 28 industrialised nations, said that its return to a bullish forecast was attributable to a higher-than-expected demand in the year-to-date, in developed countries.

The Paris-based advisor stated in its monthly Oil Market report: “These revisions do not necessarily imply the beginnings of a global economic recovery, and may not signal the bottoming out of the recession,” but instead suggests more of an improvement in market-moving oil fundamentals, as a thirst for oil begins to creep in once again.

In the market crude climbed above $72 a barrel on Thursday, for the first time in seven months – on the back of the IEA’s more bullish forecast.

The IEA increased its global demand estimate by 120,000 barrels to 83.3 million barrels for the current year. However, oil consumption is still predicted to contract by as much as 2.9% figures on last year – which is still set to be the biggest drop since back in 1981.

The climb has been predominantly driven by increased demand in the world’s two leading oil consuming nations: the U.S. and China.

In addition, it slightly raised its demand estimate for Organisation of Economic Co-operation (OECD) countries this year to 45. 2 million barrels per day (bpd), a 4.9% fall on the comparable period.

Since the turn of the year prices have steadily climbed 61%, helped by a weakened greenback driving investors away from equities markets and in search of commodities.

The reversed demand forecast, was however countered by expectations of increased output from nations outside of the Organisation of Petroleum Exporting Countries (OPEC) - by 170,000, after both Russia and Colombia reported improved production performances. However, non-OPEC output is still expected to finish the year down by 100,000 bpd, at 50. 5 million bpd.

The market will continue to watch with bated breath as OPEC, who pumps around two-thirds of all the world’s oil production, is also scheduled to release its own monthly oil report on Friday.

David Fyfe, head of the IEA’s Oil industry and Market’s Division, said of its bullish report: “This is possibly green shoots but let’s keep this in context. This is still a market in which demand is declining sharply.”