Deutsche Bank slashes 2008 oil demand outlook

A major investment bank has reported an especially low oil-demand forecast.

May 16, 2008

By OGJ editors
HOUSTON, May 16 -- A major investment bank has reported an especially low oil-demand forecast.

Deutsche Bank has reduced its global oil demand growth forecast for this year to 840,000 b/d from 1.16 million b/d. This is lower than the latest growth estimates by the International Energy Agency, the US Energy Information Administration, and the Organization of Petroleum Exporting Countries.

Even with the demand downgrade, Deutsche Bank's call for OPEC crude rises 200,000 b/d due to slipping forecasts for non-OPEC supply growth.

Adam Sieminski of Deutsche Bank noted that oil is holding near $125/bbl despite concerns of economic weakness and expectations of a strengthening US dollar.

"The forecasting tug-of-war continues between bearish analysts who believe that marginal costs near $75/bbl will dominate and those who see the need for demand destruction price levels near $150-200/bbl," Sieminski said. "We see increasing risk to the upside until demand shows more response to either price or income elasticities."

The bank's current projection for average 2009 West Texas Intermediate and Brent crudes is $102.50/bbl, supported by a weak US dollar and funds-flow issues.