June 30, 2009 3:00 am
The worst recession in decades would curtail oil demand for years to come, the International Energy Agency predicted yesterday as it cut sharply its forecasts for consumption and declared that the threat of a supply crunch had receded.
The consuming countries' oil watchdog said it expected demand to grow at an average annual rate of 0.6 per cent, or 540,000 barrels per day, from 2008 to 2014, raising consumption from 85.8m b/d to 89m b/d.
This latest forecast is 3.3m b/d lower than the previous forecast for 2013 volumes.
If the agency's most pessimistic economic scenarioproved correct, oil demand could contract, with consumption falling to 84.9m b/d by 2014, it said in a report.
The slowdown in demand growth means the cushion of spare supply the Opec oil producers' cartel holds is expected to reach 7.78m b/d next year, or 8 per cent of global demand.
Last year, the IEA expected surging energy usage to reduce that cushion to 1.67m b/d.
The size of the Opec cushion has been a driver of crude prices. The cushion's diminishing size has stoked fears Opec has too little spare supply to bring to market to plug shortfalls and contributed to last year's surge in Nymex West Texas Intermediate to a record $147 a barrel.
Yesterday, WTI futures for August delivery rose $2.33 to settle at $71.49, after an attack on a Royal Dutch Shell oil platform by a Nigerian militant group.
The IEA cautioned against placing too much faith in hopes of a swift economic recovery, which have pushed oil back up to towards $70 a barrel from half that level in February. It said "green shoots" could be accounted for by stock rebuilding after a steep inventories drawdown.
Nobuo Tanaka, the group's managing director, said that it had become difficult to make predictions and that the watchdog's assumptions, based on April data, were getting old.
"If the economy grows much faster, the market could be much tighter, and we could see much smaller spare capacity in 2014."
Total non-Opec supply was projected by the IEA to fall 400,000 b/d from 2008 to 50.2m b/d in 2014, with deferred or cancelled investments in oilfields the main factor in the decline.
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