WASHINGTON (Reuters) - The “deteriorating” global economy will slash world oil demand growth next year by 140,000 barrels per day, the U.S. Energy Information Administration said on Tuesday in its latest projection.
With pronounced weakness in U.S. oil consumption, the agency could slash projections further after taking into account the latest economic forecasts as the world struggles with a spreading credit crunch and a market sell-off.
“If we were to incorporate the more recent and evolving forecasts, as we will, you could make the argument that demand would be somewhat weaker than we anticipate,” Howard Gruenspecht, the EIA’s acting administrator, told reporters.
He said the EIA would likely revise downward economic growth estimates in its November forecast, which will result in even lower petroleum demand and energy prices.
Global oil consumption was forecast to average 86.92 million bpd in 2009, about 780,000 bpd more than this year’s demand, but 140,000 bpd less than the agency had forecast just last month.
This year world oil use was projected to rise by only 330,000 bpd, about 340,000 bpd lower than EIA’s projections last month.
“The current slowdown in economic growth is contributing to the recent decline in oil demand,” EIA said in its latest forecast.
U.S. Federal Reserve Chairman Ben Bernanke said on Tuesday that the outlook for economic growth has worsened. He said the economy was poised for subdued growth during the remainder of this year and into 2009.
The Raymond James investment firm said this week that global energy demand and energy prices “will likely be lower than we were thinking a month ago as the world grapples with reduced economic activity.”
Oil demand in the United States, the world’s leading consumer, is in much worse shape, and will actually fall this year by 830,000 bpd compared with 2007.
The decline in fuel consumption is expected to continue into next year, but at a much lower rate of 110,000 bpd. That would put 2009 oil demand at 19.74 million bpd, the lowest level in eight years, EIA said.
A side benefit of economic problems and the credit market crisis is that they were helping to push crude oil prices lower, EIA said.
“Absent a major worldwide economic downturn that significantly impacts global demand, West Texas Intermediate crude oil prices are projected to average about $112 per barrel in both 2008 and 2009,” EIA said.
On Tuesday, oil prices dipped below $90 a barrel, a sharp fall from July’s record above $147 a barrel.
Oil markets are expected to remain tight over the next six months, which will push WTI oil prices to $120 a barrel by April, before declining to $106 by the end of next year, the agency said.
“Further deterioration in actual or expected global economic growth as a fallout of the current financial crisis may lead to weaker oil prices,” EIA said.
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