The thirst for oil will plummet to five-year lows in 2009, a respected energy advisory group warned yesterday, as countries around the world continue to suffer the effects of the financial crisis.
The International Energy Agency (IEA) predicted that the demand for oil this year would be 2.4 million barrels a day lower than in 2008. The Paris-based group added for the first time in its monthly Oil Market Report that a recovery was unlikely to occur until some time next year.
The IEA's forecast cut of 1.2 per cent over its February predictions would see consumption running at 83.4 million barrels a day, similar to the levels in 2004. This marks the eighth consecutive month it has slashed forecasts.
The IEA scaled back its forecasts again after reassessing gross domestic product assumptions. The body now believes GDP will shrink 1.4 per cent worldwide, the first time its predictions are negative on 2009. It added that "much lower-than-expected" demand data in the first three months of the year had also led it to revise estimations.
The energy adviser said: "The pace of contraction is close to early 1980s' levels, with a growing consensus that economic and oil demand recovery will be deferred to 2010."
Oil prices have risen over the past month as the markets became more bullish on commodities. The boost in sentiment at the end of March sent crude oil prices above $50 per barrel for the first time since the start of the year.
The IEA said in the report, edited by David Fyfe, the head of its oil industry and markets division: "Prices recently have tracked expectations for the global economy, seeking signs of demand recovery. However, pervasively weak market fundamentals could limit further gains for now."
The Organisation of Petroleum Exporting Countries, which controls 40 per cent of the world's oil supply, met last month, and retained its target of producing 24.9 million barrels per day. However, the IEA predicted yesterday that this would create spare capacity of about 5.5 million barrels a day, adding: "Supplies stand at five-year lows, amid exceptionally weak demand." Opec ministers are set to meet again on 28 May.
The drag can be seen in the US, the world's largest consumer of oil. The IEA predicted earlier this year that demand would be almost 3 per cent lower than 2007 at 19 million barrels a day, levels not seen in a decade.
The oil price soared last summer to a high of $147 a barrel, with some analysts predicting it could hit $200 by this year. However, the drop-off in demand saw the value of a barrel plunge by December to below $40 for the first time in four years. Nouriel Roubini, the New York University economics professor, predicted last month that prices could fall further to as low as $20. He blamed two countries for the plummeting demand, saying the US "has fallen off and China has stalled".
The IEA said at the turn of the year that the price spike had smashed demand, but the force behind the continued drop was the financial and economic collapse.