Crude Oil Falls as IEA May Cut Demand Forecast a Third Month

By Mark Shenk

Nov. 11 (Bloomberg) -- Crude oil fell on speculation the International Energy Agency will lower its 2009 oil-demand forecast as slowing economic growth cuts fuel consumption.

The IEA, which coordinates energy policy in 28 developed countries, will reduce the estimated growth in global demand for a third month in a report tomorrow, according to four former IEA analysts. The euro-area economy will probably contract 0.7 percent next year, Morgan Stanley said in a report.

``It all comes back to the economy and how deep folks think the recession will be,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``Demand is poor and should get worse as the recession deepens.''

Crude oil for December delivery declined $2.23, or 3.6 percent, to $60.18 a barrel at 9:07 a.m. on the New York Mercantile Exchange. Prices, which have tumbled 56 percent since reaching a record $147.27 on July 11, are down 38 percent from a year ago.

The IEA already has cut its 2008 forecast about 1.3 million barrels a day in seven revisions this year. Last week, it published a summary of its annual World Energy Outlook, slashing its 2030 projection by 9.4 percent to 106 million.

``The view of the market is very pessimistic,'' said Addison Armstrong, director of market research for Tradition Energy in Stamford, Connecticut. ``The only news I foresee that can move prices higher is a cold spell, which would boost heating oil demand, and that would have only limited impact.''

Brent crude oil for December settlement increased $1.87, or 3.2 percent, to $57.21 a barrel on London's ICE Futures Europe exchange. Futures touched $56.11, the lowest since Feb. 13, 2007.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.