World Oil Outlook: Stable Market, Consumption To Decline

Following the sharp price decline that occurred during the second half of 2008, the global oil market has remained relatively stable since the beginning of the year. This situation is expected to continue through most of 2009, until economic recovery in the United States and elsewhere leads to a rebound in oil demand growth.

The future direction of world oil prices in the short-term will largely depend upon the timing and pace of the recovery of the global economy. Our macroeconomic forecasts are derived from the IHS Global Insight macroeconomic model. If economic growth in the United States and overseas rebounds sooner than expected, oil demand could experience stronger-than-expected growth and outpace production increases, leading to rising prices. However, any upward movement in oil prices will be muted by the relatively high levels of commercial inventories in the Organization for Economic Cooperation and Development (OECD) and surplus production capacity among members of the Organization of the Petroleum Exporting Countries (OPEC). OPEC is scheduled to meet March 15 to assess the market situation and determine its future oil production targets.

U.S. real gross domestic product (GDP) is expected to decline by 2.8 percent in 2009, leading to a reduction in domestic energy consumption for all major fuels. An economic rebound is projected to begin in 2010, with a 1.9-percent year-over-year growth in U.S. real GDP.

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