World Oil Outlook: Consumption Remains Weak, Muted Price Increases

EIA is currently projecting a weaker global oil market for 2009 than anticipated in last month’s assessment. Expectations of global economic recovery and a resultant increase in demand were offset by initial data for the first quarter showing high oil inventories, weak consumption, and higher-than-expected production. Price increases will likely be muted by the substantial surplus production capacity held by members of the Organization of the Petroleum Exporting Countries (OPEC), along with very high level of inventories among members of the Organization for Economic Cooperation and Development (OECD). The expectation that prices should rise in 2009-2010 because of future economic growth will need to be tempered with the current market reality of this supply overhang. The main downside risk to this Outlook’s oil price forecast remains a prolonged global economic slump, as well as the possibility of reduced compliance with OPEC production targets in the months ahead.

Consumption. World oil consumption remains weak because of the global economic downturn. Based on revised data and a re-estimation of the impact of the economic slowdown on oil consumption, EIA has reduced its forecast for world oil consumption from the fourth quarter of 2008 through the end of the forecast period. World oil consumption is now projected to fall by 1.8 million barrels per day (bbl/d) in 2009, a decline that is 0.4 million bbl/d larger than the decline projected in last month’s Outlook. The forecasts for Asia and the Former Soviet Union (FSU) show the largest revisions. In total, OECD oil consumption is expected to fall by nearly 2 million bbl/d in 2009, with oil consumption in Japan alone expected to fall by over 0.5 million bbl/d in 2009. Partially offsetting declining OECD oil consumption is a growth of 0.2 million bbl/d in non-OECD consumption, particularly in the Middle East, China, and India. World oil consumption is expected to grow by 0.7 million bbl/d in 2010, on the back of a rebound in global economic activity next year.

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