IEA cuts oil demand growth forecast

The International Energy Agency cut its global oil demand growth forecasts for this year due to persistent high prices and lower growth projections for developed economies.

In its monthly oil report on Thursday, the Paris-based agency warned that high oil prices could dent the fragile economic recovery.

“Persistently high prices at this stage of the economic cycle may ultimately sow the seeds of their own destruction. Until then, the market confronts fundamentals that still look likely to tighten in the second half of 2011,” it said in the report.

Preliminary March data showed a marked slowdown in global oil demand, the agency said, although the data could be distorted by the devastating earthquake in Japan and the Easter holiday period.

“Nonetheless $4 gallon gasoline is likely to yield an anemic U.S. driving season,” the agency said.

Regarding the recent price corrections, the energy watchdog said that worries about the economic impact of strong prices together with weak economic data from the United States, China and Germany had contributed to some degree of profit taking.

“But as the dust settles, prices have again begun to creep higher,” it said. “The market bull run may have legs for a while longer.”

The IEA advises 28-industrialised nations on energy policy. The other most-watched oil forecasters, including the Organization of Petroleum Exporting Countries and the U.S. Energy Information Agency expect world oil demand to rise by about 1.4 million barrels per day in 2011.

Reuters