PARIS: The International Energy Agency yesterday cut sharply its medium-term forecast for oil demand because of economic recession, but said the threat of a supply crunch had only receded, not gone away.
The adviser to 28 developed countries said in a report demand will expand by 0.6 percent, or 540,000 barrels per day (bpd) on average, between 2008 and 2014.
Its previous forecast, issued in December, predicted annual growth of 1 million bpd. Demand may be weaker depending on the pace of recovery from recession, which has cut fuel use in the United States, Europe and Asia. The IEA also lowered its supply forecasts, but postponed its prediction of a supply crunch.
“The deep economic recession that has spread worldwide in the past year has taken a severe toll on oil demand,” the Paris-based IEA said in its Medium Term Oil Market Report.
“This scenario paints a delayed picture of threatened 'supply crunch' later in the projection period.” The IEA said its “working scenario” was based on higher gross domestic product figures from the International Monetary Fund's 2009 World Economic Outlook, which saw growth recovering to nearly 5 percent annually for 2012-14.
Oil demand will rise to 89 million bpd in 2014 from 85.8 million bpd in 2008, the IEA said. This year, consumption is expected to fall to an average of 83.2 million bpd, the fastest decline since the early 1980s.
A lower scenario assumed any rebound in the economy would be slower at around 3 percent annually by 2012, which the IEA said many considered the more likely outcome.
Under the lower scenario, the IEA forecast world oil demand could contract by 140,000 bpd a year in the medium term.
Oil has recovered to roughly $70 a barrel from a low of $32.40 in December and showed little reaction to the latest report from the IEA, which has already taken a more bearish view on demand than other forecasters.
Although demand has fallen, investment in new supplies has also shrunk.
The IEA has repeatedly warned of a shortfall in energy supplies that could damage any economic recovery.
