[R-G] World oil demand to fall for first time in decades

[Anthony Fenton]

World oil demand to fall for first time in decades
Tue Dec 9, 2008 4:25pm EST
By Tom Doggett
http://ca.reuters.com/article/ousiv/idUSTRE4B84PY20081209?sp=true

WASHINGTON (Reuters) - Global oil demand will contract for the first  
time since the early 1980s as world economic growth slows to a near  
standstill, the U.S. government said on Tuesday.

The forecast for 2008 and 2009 is bad news for energy companies and  
oil producing nations that depend on robust prices, but could benefit  
cash-strapped consumers by sending gasoline and heating costs lower,  
according to a U.S. Energy Information Administration report.

World oil demand is projected to fall by 50,000 barrels per day in  
2008 and 450,000 barrels per day next year, the EIA said, led by a 1.2  
million bpd contraction in top consumer the United States this year a  
200,000 bpd drop in 2009.

The report marked the first major forecast for shrinking energy demand  
tied to the current global financial crisis.

The lower forecast came as the EIA revised down its projection for  
2009 global economic growth to 0.5 percent next year, from the 1.8  
percent projection it made in its previous report issued in November.

"The current global economic slowdown is now projected to be more  
severe and longer ... leading to further reductions of global energy  
demand and additional declines in crude oil and other energy prices,"  
the EIA said.

The last time world petroleum demand fell was in 1983, part of four  
years of straight declines in oil consumption that began in 1980, the  
agency said.

The weak economy and lower petroleum demand has already caused U.S.  
crude oil prices to sink from a record $147 a barrel in July to $43 on  
Tuesday -- a slump that has rattled energy producing nations like  
Saudi Arabia, Russia and Venezuela, and triggered massive cutbacks in  
investment in oil projects like those in Canada's oil sands.

"The increasing likelihood of a prolonged global economic downturn  
continues to dominate market perceptions, putting downward pressure on  
oil prices," the EIA said.

Demand still is expected to grow next year in emerging economies such  
as China, which helped drive the six-year rally in oil prices to  
record highs. Still, the latest EIA report revised demand from this  
group down by 40,000 bpd.

PRICE DROP

The EIA slashed its 2009 forecast for crude oil prices to $51 a barrel  
from $63.50 a barrel in its previous forecast.

"I don't think they are done revising. I think next month will be  
lower. I'm having a hard time seeing GDP growth anywhere -- we may see  
pockets of growth -- but not worldwide or regionally," said Peter  
Beutel, president of Cameron Hanover, based in New Canaan, Connecticut.

Meanwhile, the World Bank said on Tuesday that the world financial  
crisis will sharply slow world economic growth next year, ending the  
five-year global price boom for crude oil and other commodities.

The weaker energy prices could mark a bright spot for consumers who  
have been hard hit by the financial turmoil.

The EIA said it cut its winter heating oil forecast to $2.53 a gallon  
from $2.75 a gallon, and its 2009 gasoline price forecast to $2.03 a  
gallon from $2.37.

Average U.S. gasoline price are currently running about $1.70 a  
gallon, down from a record $4.11 this summer.

"We've lowered the bar for gasoline demand so much that it's going to  
take years for it to recover to the type of demand numbers that we had  
in the past," said Phil Flynn, analyst at Alaron Trading in Chicago.

(Editing by Christian Wiessner)