LONDON (Reuters) – World oil demand will contract by less than previously expected in 2009, the International Energy Agency said on Thursday in a further sign the economic outlook may have stopped deteriorating.
The agency, which advises 28 industrialized countries, said the upward adjustment followed stronger-than-expected demand early in the year in developed countries. The increase in the estimate for 2009 is the IEA’s first since August 2008.
“These revisions do not necessarily imply the beginnings of a global economic recovery, and may only signal the bottoming out of the recession,” the IEA said in its monthly Oil Market Report.
Global oil demand is expected to fall in 2009 by 2.47 million barrels per day (bpd) to 83.3 million bpd. The IEA’s previous forecast was for consumption to contract by 2.56 million bpd, the sharpest fall since 1981.
The IEA joins the U.S. government’s Energy Information Administration (EIA) in raising oil demand forecasts this week amid signs that the economic climate has stopped worsening. Expectations of recovery have helped drive oil prices to a 2009 high above $72 a barrel.
Despite the upward revision, the IEA’s latest estimate is still calling for a deeper contraction in demand this year than other forecasters tracked by Reuters.
“This is possibly green shoots but let’s keep this in context. This is still a market in which demand is declining sharply,” David Fyfe, head of the IEA’s Oil Industry and Market’s Division, told Reuters.
Oil prices edged higher after the report was released. U.S. crude was up 48 cents to $71.81 by 0953 GMT (5:53 a.m. EDT).
GASOLINE TIGHTER, STOCKS COVER LOWER
Many analysts, including the IEA, have argued that oil’s rally has been driven by sentiment and outside factors such as equities, rather than a tighter supply and demand balance.
But Thursday’s IEA report noted some support for oil prices coming from the market’s own fundamentals.
Crude processing in refineries was trending higher, OPEC supply restraint remains in place and gasoline markets are beginning to tighten, the IEA said. Also, oil stocks were lower expressed as days of forward demand.
Oil inventories in developed countries fell to 62.0 days of forward cover at end-April, a measure closely watched by the organisation of the Petroleum Exporting Countries (OPEC), which considers 52-53 days comfortable.
OPEC has been cutting its production since September last year to support prices as recession eroded demand. The group agreed to maintain its existing supply curbs of 4.2 million bpd at a May 28 meeting.
Higher oil output in May reduced OPEC’s compliance rate with its pledged supply curbs to 74 per cent, compared with 76 per cent in April, the IEA said.
Even so, that still shows OPEC has taken more than 3 million bpd — almost 4 per cent of world demand — off the market.
The IEA raised its forecast for supply from countries outside OPEC by 170,000 bpd for 2009 on higher-than-expected growth from new Russian fields, more robust North Sea production and stronger output in Colombia.
OPEC’s Vienna headquarters is due to release its own monthly oil report on Friday.
Its demand estimate is closely watched because the producer group pumps more than a third of the world’s oil.
On Tuesday, the U.S. EIA raised its 2009 world oil demand estimate by 10,000 bpd, following months of downward revisions.
(Writing by Alex Lawler; Editing by James Jukwey)
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.