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Monday, February 2, 2009

IEA Says Agency Is Likely to Cut Oil Demand Forecast (Update2)

By Fred Pals
Feb. 2 (Bloomberg) -- The International Energy Agency will probably revise its forecast for world oil demand this month because of slowing economic growth, the agency's executive director said.

"It is likely that a downwards revision happens," Nobuo Tanaka said in an interview today in The Hague. "The global economic growth projections are very pessimistic."

Tanaka said the IEA will take into account the economic forecast by the International Monetary Fund. The IMF said last month gross domestic product in the U.S. will contract 1.6 percent this year, while Japan's will fall 2.6 percent and the euro-area economy will shrink by 2 percent.

The IEA, an energy policy adviser to 28 nations, said in its Jan. 16 monthly report that world consumption in 2009 will fall by 510,000 barrels a day, or 0.6 percent, to 85.3 million barrels a day, for a second year of declining demand. The Paris-based agency is due to publish its next monthly report for Feb. 11.

Oil prices have plunged more than $100 a barrel from a record in July as the U.S., Europe and Japan face their first simultaneous recessions since World War II. The IEA's chief energy economist, Fatih Birol, said Jan. 29 that world oil demand this year may average about 300,000 to 400,000 barrels a day less than last year because of the global recession.

Rebound From December

Crude oil for March delivery fell as much as $1.67, or 4 percent, to $40.01 a barrel in electronic trading on the New York Mercantile Exchange. That's the lowest since Jan. 20. Oil was at $40.45 a barrel at 14:34 p.m. London time. Still, prices have rebounded from a four-year low of $32.40 reached Dec. 19 as the Organization of Petroleum Exporting Countries implements a record supply reduction.

OPEC, which accounts for about 40 percent of global oil supplies, agreed in December to reduce output by 2.46 million barrels a day, or 9 percent, starting Jan. 1 to stem the slide in prices. The group is due to meet March 15 in Vienna to review its oil output policy.

"If they further reduce supply, the market could be much tighter," Tanaka said. "That is a concern if we think about the health of the economy."


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