EIA raises global oil demand decline forecast

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Feb. 11 -- Global petroleum demand will fall by another 400,000 b/d during 2009 as economic conditions worsen, the US Energy Information Administration said on Feb. 10 in its latest short-term energy outlook.

EIA now projects that worldwide oil consumption will drop by 1.2 million b/d this year as a deteriorating world economy and a weak oil consumption outlook keep the market well supplied despite two downward revisions in the last 2 months by the Organization of Petroleum Exporting Countries.

Reduced demand and rising surplus production capacity through at least mid-2009 reduce the possibility for a strong and sustained oil price rebound over that period, the federal energy analysis and forecasting service said.

"OPEC is scheduled to meet in Vienna on March 15, which could lead to another production cut to mitigate some of the slack in the world oil market. However, near-month oil prices will likely be driven primarily by the global economy," it noted.

EIA now assumes that global gross domestic product, weighted according to shares of world oil consumption, will decline by 0.1% in 2009 and rise by 3% in 2010. January's short-term energy outlook assumed 0.6% growth in real GDP in 2009 and 3% growth in 2010.

Domestically, it expects GDP to fall by 2.7% this year, triggering consumption declines for all major fuels. Retail regular gasoline prices are projected to average $1.95/gal nationwide in 2009 and $2.19/gal in 2010.

The US average retail price for gasoline of $1.69 in December was the lowest monthly average since February 2004 and nearly $2.40/gal below the July 2008 monthly peak, according to EIA. "Gasoline prices have been slowly increasing over the last six weeks as crude oil prices have stabilized and refiner margins have recovered from their recent near-historic lows," it said.

"The US economic downturn is also contributing to a decline in natural gas consumption, particularly in the industrial sector, which has led to lower natural gas prices," EIA continued. It said that it expects the Henry Hub spot gas prices to decline from an average of $9.l3 per thousand cubic feet in 2008 to about $5/Mcf in 2009 before increasing to nearly $6/Mcf in 2010.

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