The International Energy Agency Friday slightly revised up its 2010 world oil demand forecast but cautioned that consumer and industrial appetite for petrol this year remains feeble as recessionary effects linger.
In its monthly oil market report, the Paris-based agency said it expects global crude consumption next year to rise 1.7%, led by China. The forecast is up from 1.4% in the IEA's medium-term report released last week.
However, next year's projected demand of 85.2 million barrels a day is only on par with what consumers used back in 2006, an indication of the generally tepid state of oil consumption due to the recession.
"Things are still weak. It looks like the U.S. for a second year in a row won't have much of a driving season (in 2009)...yet there are indications things will be better next year," said David Fyfe, editor of the IEA report.
Oil prices have taken a beating the past week as a sprinkling of economic data, including higher unemployment in the U.S., the world's biggest oil consumer, beat back expectations for more vibrant economic activity. Crude prices Friday traded down near $60 a barrel, or 18% lower from last week's eight-month high of just over $73 a barrel. The IEA, which acts as an energy advisor to mostly industrialized states like the U.S. and Japan, said world oil demand this year was still seen contracting by 2.9%, or 2.5 million barrels a day, basically unchanged from last month though the biggest drop in around 25 years.
The agency's 2009 demand outlook is more pessimistic than a number of other forecasters but its expectations for next year are generally inline with other industry reports. There is plenty of crude available to refine into gasoline and other products for consumers and that shows little sign of easing, according to the latest IEA report. Compliance of the Organization of Petroleum Exporting Countries members with the group's formal production cuts slipped again in June down to 68% compared with over 80% early this year as states like Iran and Angola leaked more barrels into the market.
Compliance is still decent historically speaking, yet the higher oil prices of past weeks are proving a good incentive for some members of the OPEC to loosen the taps.
While that pads state coffers, the additional crude thwarts the 12-nation group's effort to run down excess oil inventory -- and buoy oil prices. Crude packed away in storage caverns in places like the U.S. remains above five-year average levels.