Record oil prices put brake on demand growth: IEA

By Peg Mackey and Janet McBride

LONDON (Reuters) - The International Energy Agency on Tuesday sharply reduced its forecast for oil demand growth through the rest of 2007 and into 2008 saying oil's march towards $100 was already slowing consumption.

The adviser to 26 industrialized consumer nations cut its prediction for fourth quarter demand growth by 570,000 barrels per day (bpd) and by 180,000 bpd in the first quarter of 2008.

"...the recent dramatic price rise is having a 'short-term' shock effect, at the same time as consumers appear to be adapting behavior to deal with steady annual price increases," the agency said in its monthly Oil Market Report.

The IEA had already made deep downward revisions to demand forecasts in its October report, warning that record-high crude prices were prompting consumers to seek alternatives.

Since then, U.S. oil has risen nearly 14 percent to around $94 a barrel -- triggering more demand destruction as oil nears triple digits.

"From a practical standpoint, hitting a round number may not confer any specific damage, but the cumulative $70 rise in price since 2002 is, we believe, having a cumulative effect," the Paris-based agency said.

"There are ... strong indications that high prices are depressing demand."

As a result, in its October and November monthly reports the IEA has slashed projected fourth quarter demand growth by nearly 900,000 bpd and cut growth in the first quarter by more than 200,000 bpd.