Carola Hoyos The IEA cuts its oil demand forecast

The global economic recession has rescued the world from an impending oil supply crunch, the consuming countries’ watchdog agency said as it cut its medium-term oil demand forecasts.

The International Energy Agency now expects global oil demand to grow each year by a paltry 0.6 per cent or 540,000 b/d in 2008-2014, pushing consumption from 85.8m b/d to 89m b/d. That is considerably less than 1m b/d average yearly increase the IEA had expected last year. If the lower-end GDP forecasts turn out to be correct, oil demand could actually contract over the period, with consumption at 84.9m b/d in 2014.

This means the all-important cushion of spare supply capacity held by Opec is now expected to reach a healthy 7.8m b/d next year, or 8 per cent of demand. Compare that to last year’s forecast, which had foreseen that cushion shrinking to a mere 1.67m b/d.