Fewer barrels: EIA cuts demand forecast.
World oil demand forecast slashed
The US government's top energy forecasting agency today lowered its estimate for world oil demand in this year by 400,000 barrels per day, citing the slower global economy.
With major economies languishing in recession, the Energy Information Administration predicted world oil demand this year would fall by 1.17 million bpd from last year to 84.70 million bpd. That would be down from peak demand of 85.9 million bpd in 2007.
Crude prices fell on the news of sinking petroleum consumption, with oil futures at the New York Mercantile Exchange down more than 5% to below $38 a barrel.
In its monthly energy forecast, the EIA said it expects global oil demand to rebound next year, but the agency cut its forecast for 2010 world oil consumption by 60,000 bpd to 85.92 million bpd, according to a Reuters report.
Global oil consumption has fallen sharply during the worldwide economic slowdown and the statistical wing of the Department of Energy said oil demand this year would fall for the second year in a row.
The EIA said it expects the world economy to decline by 0.1% this year, reversing the 0.6% growth the agency had estimated in last month's forecast.
In 10 out of its last 13 monthly forecasts, the EIA has lowered its estimate for world oil demand this year.
Oil demand in China, the world biggest petroleum consumer after the United States, is forecast to slow but still grow by 250,000 bpd this year and rise another 310,000 bpd in next year.
The EIA said it expected the US economy this year to decline more than it had previously expected, "triggering decreases in domestic energy consumption for all major fuels."
US real gross domestic product (GDP) is projected to decline 2.7% this year, much more than the 2% drop the agency forecast last month.
The agency said it expected oil demand in United States, the world's top consumer, to fall 460,000 bpd this year to 19.02 million bpd.
However, the EIA said the US economy is expected to begin recovering next year, with 2.2% year-over-year GDP growth.
"Accompanying the projected economic recovery should be a mild rebound in energy consumption for all the major fuels in 2010," the agency said.
US oil demand should rise 220,000 bpd next year to 19.24 million bpd, according to the EIA.
Forecasts for shrinking global energy demand threaten oil export revenue for the government coffers of OPEC member nations. The cartel is set to meet 15 March to consider further production cuts to revive oil prices.
Oil prices have fallen more than $100 since July due to the effects of the economic slowdown.
The EIA's report is first of three major oil demand forecasts due this week. The International Energy Agency is will release its monthly supply and demand outlook on Wednesday and OPEC's monthly report will be issued on Friday.
IEA Director Nobuo Tanaka said on Tuesday his agency will likely cut its forecast for 2009 world energy demand due to the weakening global economy.