London: Global oil demand is expected to decline slightly in 2008 and 2009, the first drop in a generation, as the most severe economic crisis since the 1930s slashes consumption across the developed world.
Worldwide demand will decline by 20,000 barrels per day (bpd) in both 2008 and 2009 to 86.03 and 86.01 million bpd respectively, according to a Reuters poll of 11 analysts, banks and industry groups.
The slight fall is a large shift from a Reuters poll of experts in August, which forecast demand would increase by nearly 1 million bpd next year. Demand has not declined since the early 1980s, following the 1979 oil crisis and a severe recession in the United States.
“Global GDP growth is the main driver of oil demand, and with the economic slowdown we see global GDP rising by just 1.2% next year,” Michael Lewis, head of commodities research at Deutsche Bank, said.
“Oil demand growth tends to lag world GDP growth by about 2%, so we think we’ll see demand falling.”
The fall in demand is expected to come primarily from members of the Organisation for Economic Co-operation and Development (OECD), where recessions are predicted to be most severe, and which were heavily exposed to the record rise in oil prices this year.
OECD demand is predicted to fall by 1.39 million bpd to 47.80 million bpd in 2008, the poll showed, before declining to 46.95 bpd in 2009.
Oil demand is expected to be supported in the developed world by the near $100 drop in crude prices since they touched an all-time peak above $147 a barrel in July, but analysts said that recessions across the OECD would still crimp consumption.
“When prices were rising, demand in OECD Europe and Asia did not fall nearly as much as in the United States - where taxes are a much smaller component of the price - but it has dropped in the fourth quarter of this year,” Societe Generale analyst Michael Wittner said.
Since the collapse of US investment bank Lehman Brothers in September, which heralded a sharper downturn in the global economy, analysts have further slashed their predictions for world oil demand growth.
Emerging economy growth slows
Consumption from emerging economies such as China and India, which ignited a six-year rally in commodities that sent oil up sevenfold at its peak, is expected to continue to grow into 2009, but at a slower rate than before.
Demand growth in non-OECD economies is expected to total 840,000 bpd in 2009, compared with 1.33 million bpd in 2008.
The World Bank said on Tuesday it expects China’s gross domestic product to grow at its slowest rate since 1990 next year, cutting its growth forecast to 7.5% from 9.2%.
The International Energy Agency said in its latest monthly report that as China’s main export markets in Europe and the US are expected to slow sharply in 2009, “oil demand is expected to be somewhat weaker”.
The agency - adviser to 28 industrialised nations - said that should Chinese GDP growth fall to just 7 percent in 2009, it would only see 220,000 bpd of oil demand growth.