Global oil demand to be lower than earlier forecast, IEA says

World oil demand is likely to grow by an average of 0.6 per cent annually until 2014, the International Energy Agency forecast Monday, revising its expectations downward amid the global recession.

The Paris-based IEA, which advises oil-consuming countries, said under the International Monetary Fund's current forecast of a return tofive per cent annual economic growth by 2012,oil demand would reach 89 million barrels a day by 2014.

In 2009, however, oil demand is set to drop for a second-straight year, the first time oil demand has fallen for two consecutive years since 1982-1983.

The IEA said the recessionary impact, combined with signs of a structural shift to less intensive long-term oil use, were behind its cut of at leastthree million barrels a day to its oil demand forecasts for the coming five years.

Growth in oil demand is expected to come mainly from developing countries in Asia and the Middle East, the IEA said. If the trend continues, demand outside the 30-member Organization for Economic Co-operation and Development will outstrip that within the OECD by 2014, the IEA said.

The agency paints a similar picture for the natural gas market. After a one per centincrease in 2008, OECD gas demand fell by four per centduring the first quarter of 2009 and the IEA forecasts that global gas demand will fall for the first time in 50 years in 2009.

Global capacity to produce liquefied natural gas is forecast to increase by more than 50 per cent between 2009 and 2013, but uncertainties such as the severe gas disruption caused by a pipeline dispute between Russia and Ukrainein 2009 will make the natural gas market unpredictable moving forward, the agency said.

The IEA made Monday's forecasts in its medium-term outlook reports for the oil and gas markets. It allowed that under a lower GDP scenario, oil demand would contract by 0.2 per cent annually on average to 84.9 million barrels a day.

The lower growth forecast "assumes any rebound in the global economy will be slower and attain lower trend growth than the IMF projection," the IEA said.

The use of two growth scenarios "acknowledges the widespread uncertainty over the recovery path likely to emerge from the worst global economic recession in half a century," the IEA said.

A year ago, the IEA was estimating daily oil needs would rise to 94.14 million barrels in 2013. That, too, was a downgrade to its previous year's medium-term estimate and was due to skyrocketing oil prices.

Prices later plunged and are today about half what they were a year ago.

Oil prices hovered above $69 (U.S.) a barrel Monday as traders looked to macroeconomic indicators this week for signs of improvement in the U.S. economy.