World oil demand will rise less than expected in 2008 because of slower economic growth in the United States and other industrialised countries, the International Energy Agency said on Friday.
Global consumption will rise by 1.27 million barrels per day (bpd), 460,000 bpd less than the previous forecast, said the IEA, adviser to industrialised countries, in its monthly Oil Market Report.
The assessment follows the latest outlook from the International Monetary Fund, which this week issued lower economic growth forecasts. Growth in top oil consumer the US this year was cut to 0.5 per cent from 1.5 per cent.
"The latest GDP projections from the IMF suggest less robust oil demand growth in the coming months," the IEA said. "This report projects April and May oil balances tipping towards a supply surplus."
Lower demand in members of the Organization for Economic Co-operation and Development accounted for the bulk of the revision. The IEA cut expected OECD demand this year by 320,000 bpd to 48.9 million bpd.
The agency also trimmed its forecast for 2008 demand in China, the world's second-largest oil consumer, by 70,000 bpd, partly due to weather-related effects in the first quarter.
The reduction brings the IEA's global demand forecast closer to that of the Organization of the Petroleum Exporting Countries, which expects growth of 1.2 million bpd this year.
But the IEA said weaker demand might not translate into lower oil prices given supply risks in countries such as Nigeria and Iraq. Oil rose in the second half of 2007 even though inventories were also climbing, it noted.
"That perhaps explains why, in the face of weakening economic growth, prices continue to remain high: there is concern that projected stockbuilds may not materialise, or may not be high enough."
The IEA trimmed its forecast for oil supply outside Opec this year and said oil inventories fell in February and preliminary figures showed only a small increase in March.
Commercial oil inventories in the OECD fell 49 million barrels in February and rose by just 6.3 million barrels in March. That leaves stocks equalling 53.3 days of forward demand at the end of February, below levels at the same time last year. (Reuters)
IEA cuts world oil demand forecast as economy slows