- The Washington Times - Saturday, April 11, 2009

The International Energy Agency expects global oil demand to decline by 2.4 million barrels a day this year, about the same amount that Iraq produces, as the economic slump reduces consumption to the lowest level since 2004.

The adviser to 28 nations cut its 2009 forecast for an eighth consecutive month, slashing last month's estimate by 1 million barrels a day, or 1.2 percent, to 83.4 million barrels a day. The IEA also said oil supply from outside the Organization of Petroleum Exporting Countries will drop this year.

“The pace of contraction is close to early 1980s levels, with a growing consensus that economic and oil demand recovery will be deferred to 2010,” the Paris-based adviser said in a monthly report Friday.

Demand will shrink by 2.8 percent this year as worldwide gross domestic product shrinks by 1.4 percent, according to the IEA, which until now had assumed the global economy would expand in 2009. The decline outpaces supply from OPEC's third-largest producer, Iraq, which last month pumped 2.3 million barrels a day.

The outlook “implicitly discards” the agency's earlier view that industrial activity, and demand for fuels, would recover in the second half of the year. Consumption during the first three months of this year was revised lower by 700,000 barrels a day.

The collapse in demand will be concentrated in the world's most developed nations, members of the Organization for Economic Cooperation and Development, where an “unusually severe recession” will curb consumption by 4.9 percent this year.

Non-OPEC supply will fall by 300,000 barrels a day this year, a second annual decline, to 50.3 million barrels a day.

Over the next five years global supplies will be “severely constrained by today's lower prices and lower investment,” the report said. Spending on new production will likely be constrained by around 20 percent this year.

OPEC, which supplies about 40 percent of the world's oil, is still in the process of implementing reductions agreed to last year totaling 4.2 million barrels a day.

The 11 OPEC nations bound by production quotas pumped 25.6 million barrels of crude oil a day last month, the IEA said, compared with their official Jan. 1 limit of 24.8 million a day. That implies the group has collectively completed 83 percent of its promised reduction, the IEA said.

All 12 members, including Iraq, will need to provide about 28.2 million barrels of crude a day this year to balance global supply and demand, the IEA report showed. That's a reduction of 700,000 barrels a day from last month's assessment, driven by plummeting fuel use in developed economies.

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