World Oil Demand to Decline by 500,000bpd
By Ejiofor Alike, 12.09.2008
United States Energy Information Administra-tion (EIA) has predicted that the world crude oil consumption will decline by 500,000 barrels per day in 2008 and 2009, making it the first time since the 1970s that global crude demand had fallen in two consecutive years.
In its monthly short term outlook issued yesterday, EIA also said that the increasing likelihood of a prolonged global economic downturn had continued to dominate market perceptions, putting downward pressure on oil prices.
EIA noted that if the world economy recovers sooner, oil consumption could decline at a slower rate or potentially increase instead, putting upward pressure on oil prices.
“The status of the global economy has become the most important driver of oil consumption growth and EIA’s oil consumption projections continue to be revised downward in response to lower forecasts for global economic growth. As a result, global oil consumption is expected to decline by 50,000 barrels per day in 2008 and by 450,000 bbl/d in 2009, which would mark the first time in 3 decades that world consumption would decline in 2 consecutive years,” the EIA said.
The EIA also said it expects the price of oil to average $51 a barrel in 2009.
EIA projects that OPEC crude production will fall from 32.6 million barrels per day in the third quarter of 2008 to 30.6 million barrels per day in the first quarter of 2009 from its earlier estimated of 31.26 million bpd. OPEC crude production is expected to average 30.6 million bpd in 2009, about 1.6 million barrels per day below 2008 levels
“OPEC is scheduled to meet on December 17 to evaluate the effectiveness of its earlier decisions to cut production targets by 1.5 million barrels per day and to weigh the need for additional production cuts. Although the extent of OPEC members' compliance with the last production cut is still uncertain, EIA believes that the continued weak market conditions will prompt higher-than-usual compliance among OPEC members,” EIA said.
“It remains unclear whether production cuts so far are enough to avoid a counter-seasonal inventory build in the fourth quarter of 2008, a build that would add to downward price pressure over the winter. The position of some OPEC members at the upcoming meeting may be influenced by a desire to avoid excessive production cuts that might further tighten the market and trigger a sharp price rebound that could hurt the world economy,” EIA added.
It also said that crude oil supply from non-members of the Organisation of Petroleum Exporting Countries (OPEC) is expected to decline by 310,000 barrels per day in 2008.
EIA attributes this decline to a combination of factors that include large supply disruptions in Central Asia and the Gulf of Mexico and project delays.
EIA projects that total non-OPEC supply will grow by 410,000 bpd in 2009, down from the EIA's prior estimate of 490,000 bpd, with the largest sources of growth coming from Azerbaijan , Brazil and the United States .
That would put non-Opec output next year at an average 49.09 million bpd, down from 49.2 million bpd the EIA has previously forecast.
