New Forecasts Paint a Bleak Picture for Global Oil Markets in 2009

In January 2009, the International Energy Agency (IEA), the U.S. Energy Information Administration (EIA) and the Organization of Petroleum Exporting Countries (OPEC) all released revised outlooks for global oil supply and demand reflecting increasingly pessimistic assessments of global economic conditions.

The IEA forecast, which projected a sharp contraction in global oil demand this year, represented the largest single monthly revision that the agency has made in recent memory and a downward adjustment of some 2.5 million barrels per day (mmb/d) below the forecast the agency developed for 2009 only six short months ago. The new outlook calls for 2009 global liquids demand to average 85.3 mmb/d--nearly 500 mmb/d less than total liquids demand in 2008. An obvious contributor to the reduction was the IEA’s revised estimate for global gross domestic product (GDP) growth, which at 1.2 percent is now half the level of previous forecasts. In the latest IEA projection, U.S. and EU demand continue to decline and even Chinese year-on-year growth dropped to less than 100 mmb/d, reflecting GDP growth at 6.5 percent.

The combined IEA, EIA and OPEC estimates put 2008 demand between 85.77 (IEA) and 85.91 mmb/d (EIA). The projected range of 2009 demand is between 85.10 (EIA) and 85.66 mmb/d (OPEC), indicating a year-on-year drop of between 200 and 800 mmb/d.