NEW YORK (Reuters) - Investment bank Lehman Brothers LEH.N said Wednesday it slashed its forecast for 2008 world oil demand growth due to a steeper-than-expected slowdown in energy consumption in the United States and other OECD countries.
Lehman added it believes the oil market is "approaching a tipping point" with prices expected to decline to an average of $90 a barrel in the first quarter of 2009.
"We now forecast annual oil demand for 2008 at 86.3 million barrels per day, a growth of 790,000 bpd from 2007. The growth has been revised down from projections of 1.5 million bpd in December," Lehman said in a research note titled 'Demand Demolition'.
Oil prices struck a record over $147 a barrel on July 11 -- the peak of a six-year rally driven by stunning growth in China and other developing economies alongside rising geopolitical tensions, particularly between the West and Iran over its nuclear program.
But prices have dropped about $20 since then, the steepest decline in dollar terms in the market's history, amid mounting evidence of a consumption slowdown in the United States and Europe due to economic turmoil and high fuel prices.
"Despite surprising continued strength in China, one-off demand spikes in Japan from nuclear outages, and artificially increased European demand growth year-on-year due to the abnormally warm winter in 2007, the world demand balance has weakened significantly," Lehman said.
The U.S. Energy Information Administration's most recent statistics show domestic oil products demand running roughly 3.2 percent below last year, year-to-date.
Reporting by Richard Valdmanis; Editing by John Picinich