Battered by the global economic crisis, world oil demand will fall in 2008 for the first time since 1983, a U.S. government forecast released Tuesday said.
Global oil demand is expected to average 85.75 million barrels a day, down 50,000 barrels a day from a year earlier, the Energy Information Administration said in its Short-Term Energy Outlook. The latest projection is a downward revision of 140,000 barrels a day from the month-earlier forecast.
"The current global economic slowdown is now projected to be more severe and longer than in last month's outlook, leading to further reduction of global energy demand and additional declines in crude oil and energy prices," EIA said.
EIA lowered its 2009 forecast by 630,000 barrels a day, to 85.3 million barrels a day. Global demand next year is projected to drop 450,000 barrels a day from the revised 2008 level. Last month, EIA projected global demand would rise by 180,000 barrels a day in 2009.
For the first quarter of 2009, EIA cut global demand by 700,000 barrels a day, or 0.8%, to 85.37 million barrels a day. EIA had expected in November that first-quarter demand would be unchanged from a year earlier, at 86.07 million barrels a day.
Demand in the major industrialized nations that comprise the Organization for Economic Cooperation and Development is expected to fall 2.4%, or 1.19 million barrels a day in the first quarter. Non-OECD demand is expected to rise 480,000 barrels a day, or 1.3%, from a year earlier.
In China, the world's second-biggest oil consumer after the U.S., first-quarter oil demand is expected to average 8.03 million barrels a day, up 4%, or 310,000 barrels a day from a year earlier, and down 40,000 barrels a day from the month-earlier projection.
For all of 2009, China's oil demand is expected to rise by 3.75% to 8.3 million barrels a day, after a 5.5% rise in 2008.
EIA said oil inventories held by the OECD countries rose by 568,000 barrels a day in the third quarter, "somewhat higher than historic rates" for this time of year. Commercial stocks stood at 2.65 billion barrels at the end of the third quarter, equal to 57 days of forward consumption.
"On the basis of days of forward cover, OECD commercial inventories are well above historic levels, and EIA projects they will remain there through the end of 2009," the report said.
EIA said its demand projections are based on a slowdown in world real gross domestic product to near 2.7% in 2008 from near 4% in 2006 and 2007. For 2009, EIA sees global real GDP growth at 0.5%, a steep revision from its forecast of 1.8% in its month-earlier forecast.
EIA cut its forecast for U.S. benchmark West Texas Intermediate crude oil in 2009 by 19% from its November outlook, to $51.17, a five-year low, and nearly half the expected 2008 average of $100.40 a barrel.
Oil production from countries outside the Organization of Petroleum Exporting Countries is expected to fall by 310,000 barrels a day this year, due in part to supply disruptions in central Asia, the U.S. Gulf of Mexico, and project delays. EIA said even though many non-OPEC areas, including Mexico, the North Sea and Russia, are expected to show lower output in 2009, non-OPEC supply will grow by 410,000 barrels a day next year, with gains in Azerbaijan, Brazil and the U.S.
EIA cautioned that lower oil prices are impacting the viability of some high-cost non-OPEC projects, and said delays in development "would heighten the risk of a return to a tight supply situation once the world economy and oil demand growth recover."
OPEC ministers meet Dec. 17 to review two output decisions taken in September and October to reduce output by a total of 2 million barrels a day. EIA said compliance with the cuts is still uncertain, but low prices and the weak market will prompt higher levels of compliance.
EIA projected OPEC output will average 30.6 million barrels a day in the current quarter, down 2 million barrels a day from the third quarter. For all of 2009, EIA projects OPEC will pump 30.6 million barrels a day, about 1.6 million barrels below the 2008 average.