World oil demand shrinks

Global oil demand is seen contracting more sharply this year than previously expected, as the deepening economic crisis spreads to the developing world.

Slowing demand has been the lead factor in sending prices crashing back down to about $40. The IEA predicts Chinese oil demand will grow by just 90,000 bpd in 2009. That is compared to average growth of around 400,000 bpd over the last three years.

The large predicted fall is a significant shift from a Reuters poll in November, which forecast demand would slip by 20,000 bpd in 2009, following a similar decline in 2008.

“Demand growth in emerging nations almost offset the demand contraction in the developed world in 2008, but with demand growth now expected to almost halve in 2009 in the developing world, that is no longer the case,” said Francisco Blanch, head of commodities research at Merrill Lynch.

Reuters