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Last updated: June 29, 2009 6:44 pm
The worst recession in decades will curtail oil demand for years to come, the International Energy Agency predicted on Monday as it cut sharply its forecasts for world consumption and declared that the threat of a supply crunch had receded.
The consuming countries’ oil watchdog said it expected global demand to grow at an average annual rate of just 0.6 per cent or 540,000 barrels a day from 2008-14, 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 scenario proves 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 crucial cushion of spare supply the Opec oil producers’ cartel holds is now 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 supply cushion to 1.67m b/d.
The size of the Opec cushion has been an important driver of international crude prices. The cushion’s diminishing size has stoked fears that Opec has too little spare supply to bring on to the market to plug shortfalls and contributed to last year’s surge in benchmark Nymex West Texas Intermediate to a record $147 a barrel.
On Monday, WTI futures for August delivery rose 49 cents to $69.65, after an attack on a Royal Dutch Shell oil platform by a Nigerian militant group.
The IEA cautioned against putting too much faith in hopes of a swift economic recovery, which have pushed the oil price back up towards $70 a barrel from half that level in February. It said that economic “green shoots” could be accounted for by stock rebuilding across industries after a steep drawdown of inventories.
Nobuo Tanaka, the group’s managing director, said 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 reason for the decline.
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