IEA Cuts 2009 Oil Demand Forecast a Second Month on Bank Crisis

By Grant Smith

Oct. 10 (Bloomberg) -- The International Energy Agency, an adviser to 28 nations, cut its forecast for global oil demand next year by 0.5 percent as the worst financial crisis since the 1930s threatens a global recession.

The IEA lowered its 2009 projection by 440,000 barrels a day to 87.2 million barrels a day, the Paris-based agency said today in its monthly report, citing a weaker economic outlook from the International Monetary Fund. Non-OPEC supply growth this year has been ``largely wiped out'' after hurricanes in the Gulf of Mexico and pipeline disruptions in Azerbaijan.

``Demand is looking weaker alongside economic prospects,'' David Fyfe, the head of the IEA's oil industry and markets division, said in a phone interview from Paris. ``There are partly counterbalancing supply-side issues. We've lost a lot of oil as a result of the U.S. hurricanes and what's been happening in the Caucasus and Azerbaijan.''

Oil prices are set for their biggest weekly decline since 2004, as the escalating credit crisis deepens concerns over economic growth and erodes consumer demand for oil products. Futures have fallen about 44 percent since reaching a record $147.27 in New York in July.

The International Monetary Fund said in its latest World Economic Outlook on Oct. 8 that the world's most advanced economies will grow at the slowest pace since 1982 next year. Industrial economies will grow 0.5 percent in 2009, down from 1.5 percent this year, according to the Washington-based Fund.

The IEA still expects oil demand to rise by 700,000 barrels a day, or 0.8 percent, in 2009. The agency cut its estimate for 2008 for the seventh time this year, by 240,000 barrels a day, or 0.5 percent, to 86.5 million barrels a day.


OPEC Demand

Demand growth from outside the Organization for Economic Cooperation and Development was left unchanged at 38.4 million barrels a day this year and increased by 40,000 barrels a day to 39.7 million a day in 2009.

``Oil demand growth areas, notably the Middle East and emerging Asia, have yet to show a significant slowdown,'' the report said. ``Even if global economic growth slows down - but short, of course, of global recession - China's oil demand growth can arguably remain in positive territory in the foreseeable future.''

The IEA's membership increased to 28 countries last month with the admission of Poland.

Supplies from outside the Organization of Petroleum Exporting Countries, will grow 150,000 barrels a day this year to 49.76 million a day, according to the report. That's 120,000 barrels a day less than the agency anticipated last month, following storm damage to Gulf of Mexico installations and outages in Azerbaijan.

Extraordinary Meeting

Non-OPEC production will increase 660,000 barrels a day to 50.42 million barrels a day next year, according to the report.

OPEC, which supplies more than 40 percent of the world's oil, said yesterday it will hold an extraordinary meeting in Vienna on Nov. 18 after the global financial crisis sent crude prices below $90 a barrel.

OPEC pumped 32.25 million barrels a day last month, 330,000 barrels a day less than in August because of unscheduled disruptions in Angola, Iraq and Nigeria, according to IEA estimates.

The organization will need to provide about 30.9 million barrels a day next year to balance world supply and demand, the report showed. That's about 200,000 barrels a day less than it estimated last month. This so-called ``call on OPEC crude'' was likewise trimmed for this year, by 100,000 barrels a day to 31.8 million a day.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net