Analysis: Global power demand to languish in 2009

The outlook for energy commodities this year remains grim, says a new report from Merril Lynch. Neither cold winter temperatures in the Northern Hemisphere nor a steep fall in the price of energy have provided much support to the demand for oil, natural gas or coal.

In part, the low price elasticity of demand has prevented a recovery in consumption even after a collapse in energy prices. More broadly, as global economic activity continues to deteriorate, the risks to our energy forecasts remain skewed to the downside.


Global leading indicators released in recent weeks have continued to plunge to new lows, suggesting further energy demand weakness ahead. Demand for cars, air travel or steel continues to contract, forcing manufacturers and service providers to downsize factories and service lines in all regions of the world. In turn, the rise in unemployment is further deteriorating energy demand prospects, and Merril Lynch said it does not expect any economic recovery until policy responses start to take hold in second half 2009. Thus, energy markets will remain closely linked to real economic activity, and a near-term rebound in prices is unlikely.

Business Intelligence Middle East