IEA Cuts World Oil Demand Forecast on Weak Economy

The International Energy Agency (IEA) on Friday cut its oil demand growth forecast for 2008 to the lowest rate in 15 years, citing economic weakness and "a spiraling liquidity crisis."

In a monthly report, the agency reduced its 2008 demand growth forecast by 250,000 barrels per day (bpd) to 440,000 bpd.

This works out to a 0.5 percent growth rate -- the lowest in percentage terms since 1993.

But the IEA cautioned against too much focus on demand, saying the credit crisis would also impact investment in bringing on new oil supply.

Already, world output fell by more than 1 million bpd in September partly because of storm disruption, it said.

"The key message is the downward adjustments in the demand numbers in line with the weaker economic prognosis," David Fyfe, head of the IEA's Oil Industry and Markets Division, told Reuters.

"But we've also lost quite a lot of oil on the supply side in recent months."

World oil demand is expected to average 86.5 million bpd in 2008.

The agency lowered its 2009 demand growth prediction by 190,000 bpd to 690,000 bpd.

The Paris-based agency, adviser to 28 industrialized countries, has so far pared around a half million bpd from its 2008 global demand estimate and 400,000 bpd from its 2009 forecast.

It said the impact of global economic weakness was most acute in developed countries while developing economies were showing "a degree of resilience."

"Although non-OECD slowdown is also likely, it is by no means certain that growth will be choked off altogether. We have yet to see unambiguous evidence of a sharp slowdown in China, while Middle Eastern demand growth remains robust."

The IEA, which has long warned investment was inadequate, said the credit crisis had made matters worse.

"Credit shortages are rapidly becoming yet another in a long line of impediments to industry investment," it said.

Non-OPEC net oil output growth has been almost wiped out for this year to an average of only 150,000 bpd.

The IEA said the impact of OPEC's decision in September to agree strictly to its output targets had so far reduced its output by 300,000 bpd to 32.3 million bpd last month.

The Organization of the Petroleum Exporting Countries has called an extra emergency meeting on Nov. 18 in Vienna to reassess the oil market in the light of global financial turmoil.

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