WASHINGTON (Reuters) - The U.S. government’s energy forecasting agency is likely to cut its estimate for global oil demand this year because of the spike in oil prices due to unrest in the Middle East.
The U.S. Energy Information Administration’s outlook to be released on Tuesday is the first of three world oil demand forecasts this month that will factor in the recent rise in crude prices.
The Organization of Oil Exporting Countries releases its forecast this Friday, followed by the International Energy Agency’s oil demand outlook on March 15.
The EIA forecast comes as world oil prices race past $100 a barrel to 2-1/2-year highs and U.S. drivers face gasoline pump prices zooming toward $4 a gallon.
Surging fuel costs have caused consumers to reduce driving. Many economists fear they will also cut other spending. That could slow the economy, which would hit oil demand.
“I think it is obvious that this could cut into demand,” said Phil Flynn, energy analyst at PFGBest in Chicago about the effect of current high oil prices.
“This is probably the greatest risk to demand and the economy we’ve seen in some time,” he said.
Guy Caruso, energy expert at the Center for Strategic and International Studies think thank and former head of the EIA, said if current U.S. oil prices of $105 a barrel and gasoline at $3.50 a gallon prevail for the rest of 2011, U.S. oil demand would probably fall by 100,000 to 200,000 barrels per day.
However, the oil price would drop $5 to $10 a barrel in the short-term, and demand would rebound somewhat, if the Obama administration tapped the U.S. emergency oil stockpile, he said.
The EIA last month increased its forecast for global oil demand this year by 140,000 bpd, from the previous month’s forecast, to a record 88.16 million bpd. In 2010 oil demand was 86.72 million bpd.
The demand forecast from the EIA is usually in the middle of the OPEC and IEA demand outlooks.
OPEC increased its forecast last month for global oil demand this year by 170,000 bpd to 87.7 million bpd.
The IEA boosted it global oil demand estimate by 120,000 bpd to reach 90 million bpd in late 2011 for the first time.
Traders will be watching to see if the IEA revises last month’s optimistic forecast that said spare global production capacity and high oil inventories will help to constrain further oil price increases in 2011, a prediction that hasn’t yet come true.
Reporting by Tom Doggett; Editing by David Gregorio