IEA Slashes 2012 Oil Demand Forecast on Record Prices

(Bloomberg) — The International Energy Agency cut more than 3 million barrels a day from its 2012 global demand forecast because record prices and slower economic growth will curb fuel purchases.

A drop in OPEC spare capacity to a “negligible” 1 million barrels a day by 2013 will keep the market `tight,” the agency said in its Medium-Term Oil Market Report today. Oil above $140 is dampening consumption of motor fuels in the 27 nations advised by the Paris-based IEA, which cut demand estimates for each year between 2009 and 2012 by about 3 percent.


“With oil prices hitting $140 we are clearly in the third oil shock, with prices affecting economic growth,” IEA Executive Director Nobuo Tanaka said at the World Petroleum Congress in Madrid today. “Truck drivers are going on strike. Airlines are closing down.”

Drivers are switching to smaller, more efficient cars and making fewer journeys to reduce spending on gasoline that has reached more than $4 a gallon in the U.S., the world’s biggest energy consumer. U.S. gasoline purchases have dropped every week since the start of the peak driving season last month.

While the IEA expected its barrel-counting analysis would show weaker demand, the “surprise” was that its supply forecast also needed to be cut, Tanaka said in Madrid.

Growth in global supply capacity will peak at about 2.5 million barrels a day in 2010, slowing to less than a million a day for the following three years, the report said.

The oil market will be “tighter” than previously expected because many major oil projects are experiencing “slippage” of 12 to 15 months in their completion time, he said.

Bloomberg