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IEA: Consumption wonâ€™t regain last yearâ€™s levels until 2012

30 June 2009 11:59 (UTC +04:00)

Bakuâ€“ APA-Economics. The International Energy Agency, an adviser to oil-consuming nations, cut five-year forecasts for global crude demand because of the economic slump, predicting consumption wonâ€™t regain last yearâ€™s levels until 2012.

The IEA cut its oil demand estimates for every year through 2013 by about 3 million barrels a day, it said in its Medium- Term Oil Market Report today. Consumption will average 86.76 million barrels a day in 2012, the first year it will rise above 2008â€™s level of 85.76 million barrels a day, according to the Paris-based agency.

The worst global economic crisis since World War II has crimped oil demand in developed economies and slowed growth in China and India. While the drop in consumption has postponed the threat of a potential oil supply shortfall, risks remain as the recession forces companies to cut spending on new production, according to the IEAâ€™s executive director Nobuo Tanaka.

â€œThere is so much uncertainty about the economic recovery and how fast it may happen,â€ Tanaka said in an interview after the reportâ€™s release in Paris today. â€œWe may have a supply crunch again, just like last year, in 2014 to 2015. If the economic recovery is slower, we could have ample supply capacity.â€
Annual Increases
Oil demand in 2014 will rise to 88.99 million barrels a day, according to the IEA. From 2009, when oil demand will fall the fastest since the early 1980s, that represents an average annual increase of about 1.4 percent, or 1.2 million barrels a day. From 2008 levels it represents an average increase of 0.6 percent, or 540,000 barrels a day.
The IEAâ€™s oil demand estimates reflect a â€œhigher GDP scenarioâ€ based on the International Monetary Fundâ€™s forecasts for global economic growth made in April. The IMF expects world economic expansion to reach nearly 5 percent a year between 2012 and 2014, the IEA said.
In its â€œlower GDP scenario,â€ which assumes that a rebound in the global economy will be 3 percent a year, the IEA said global oil demand could fail to reach last yearâ€™s levels by 2014, standing at 84.92 million barrels a day, 6.34 million barrels less than predicted in December.
â€˜Market Turmoilâ€™
â€œMany see the lower variant, or something close to it, as a more likely outcome, so profound could be the fallout from the recent financial and economic market turmoil,â€ the IEA said in the report.

Consumption in developed economies will shrink 1.1 percent a year to 44.4 million barrels a day in 2014, even under the higher GDP scenario, according to the IEA estimates. According to the lower economic growth estimate, OECD demand may shrink as much as 1.5 percent.
Demand in developing economies outside the Organization for Economic Cooperation and Development will rise through 2014. Oil use in those countries will increase an average 2.6 percent a year to 44.6 million barrels a day, according to the IEA.
Tempers Demand
While the economic slump tempers global demand growth, it may also cause supply to shrink as lower exploration and production spending delays projects and reduces spare capacity, according to the IEA.
Supplies from outside OPEC are forecast to decline by 0.4 million barrels a day between 2008 and 2014, compared with six- year growth of 1.5 million barrels a day forecast in the last report, the IEA said. The biggest revisions are in the former Soviet Union and North America, where projects to develop Canadaâ€™s oil sands are being delayed, the IEA said.
The group predicts that non-OPEC supply will peak at 51.12 million barrels a day in 2011 and start declining thereafter, reaching 50.22 million barrels a day by 2014.
As new oil projects are delayed, the IEA estimates global oil capacity to increase 4 million barrels a day by 2014, compared with its previous estimate of 5.5 million barrels a day. Spare production capacity in OPEC countries will drop â€œsubstantiallyâ€ below 5% of global demand in the following two years, it said.
â€œSupply capacity growth is going to be constrained over the next five years,â€ David Fyfe, head of the IEAâ€™s oil industry and markets division, said in an interview in Paris today. â€œWith lower prices and lower spending in 2009, we think supply-capacity growth is going to be very sticky.â€
The Medium-Term report, a publication was introduced as a bridge between the agencyâ€™s monthly reports, which give two-year forecasts, and its annual world energy outlook, which has 25- year projections. Source: Bloomberg