EIA oil demand forecast may reflect better economy

WASHINGTON (Reuters) - Oil traders will be watching the release of a U.S. government energy forecast on Tuesday for signs that months of falling global oil demand will finally be stopped by economic recovery in big energy consuming nations.

The U.S. Energy Information Agency monthly report, due out at noon EDT (1600 GMT), comes as recent government data suggests that parts of the U.S. economy are improving, which has pushed oil prices higher. At the same time, economies of major energy-consuming countries, like China, are also improving.

As a result, the EIA's new monthly forecast could mark the first time since last September that the agency does not make a cut in expected global oil consumption, and may even boost its demand estimate slightly, according to energy experts.

"I think we're real close to a point and time where we're not going to see any more downward revisions in demand, at least across 2009," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

Ritterbusch said EIA's forecast last month for a further 420,000 barrel-per-day reduction in global oil demand this year "might have been a little too big" and as a result in the agency's new forecast "we could see negligible change in demand expectations."

The EIA estimated global demand at 83.67 million bpd, which would be the lowest level in five years.

Along with the EIA, the International Energy Agency releases its monthly oil supply and demand forecast on Thursday, followed by the Organization of Petroleum Exporting Countries' oil consumption predictions on Friday.

The EIA has cut it estimate for 2009 global oil consumption in 13 of its last 16 monthly forecasts.

But some of the so-called "green shoots" of economic recovery are expected to take root in the EIA's oil demand forecast, according to Phil Flynn, with Alaron Trading in Chicago.

"I do think they are going to acknowledge what we've seen in the economy a little bit, at least some stabilization of the market place," he said. "I think they're going to, if not keep their demand expectations steady, they'll probably ratchet them up a little bit."

However, some energy experts still think it will be a few more months until declining global oil demand finally hits bottom, despite the recent good economic news.

"The interesting thing is that we've seen a lot of these so called green shoots, but not so much in oil (demand)," said Peter Beutel, president of Cameron Hanover in New Canaan, Connecticut.

"The (oil) price is responding to all these things, but demand is still substantially lower than it was a year ago," he said. "We've still got (petroleum) stocks at very high levels, so I'd be hard pressed to say what were the green shoots in the supply and demand of oil."

The EIA's forecast is also expected to show higher crude oil and retail gasoline prices.

In addition to demand estimates, the EIA's forecast will also make projections on the amount of oil and natural gas production that will likely be shut-in due to hurricanes this year.

Government weather forecasters expect the 2009 U.S. hurricane season to be fairly average, with up to seven hurricanes expected to form. Up to three of those storms could be major ones with winds above 110 miles per hour (177 km per hour).

(Editing by Christian Wiessner)