London: The International Energy Agency, or IEA, the energy adviser to 27 nations, cut its forecast for global oil demand for a fifth month as record prices dented consumption.
IEA reduced its 2008 forecast by about 70,000 barrels a day to 86.77 million barrels a day from 86.84 million last month, the Paris-based agency said on Tuesday in its monthly report.
“The current oil price rally could impinge upon growth prospects,” according to the report. “Globally, the high oil price is contributing to inflationary pressures.”
Oil costs that have more than doubled in a year are curbing consumption as motorists drive less and airlines scale back routes. Emerging economies including India and Indonesia are raising prices to rein in use of subsidized fuels.
Oil traded in New York touched a record $139.12 (Rs5,968) a barrel on 6 June. Goldman Sachs Group Inc. and Morgan Stanley forecast that prices may reach $150 a barrel this summer. IEA lowered its projections for supply from outside the Organization of Petroleum Exporting Countries, or Opec, this year by 300,000 barrels a day to 50.04 million barrels a day.
Opec, which supplies more than 40% of the world’s oil, will need to provide about 31.6 million barrels a day this year to compensate, the report said. That’s about 300,000 barrels a day more than IEA anticipated last month. The group pumped 32.31 million barrels a day last month, 40,000 barrels a day more than in April, according to the report.
The Group of Eight rich nations, together with China and India, vowed at the weekend to heighten fuel efficiency. China, set to spend $45 billion subsidizing oil refiners this year, is under pressure to follow India, Malaysia, Taiwan and Indonesia in shifting the burden of unprecedented oil costs onto consumers.
Producers ought to meet with consuming nations “soon” to discuss ways to deal with record prices, Saudi Arabian oil minister Ali al-Naimi said on Monday.
IEA’s reduction in projected oil use remains “modest” because demand in emerging markets compensates for slacker consumption among developed nations, the agency’s chief economist Fatih Birol said in a Bloomberg Television interview. “The declines in the OECD (Organisation for Economic Co-operation and Development) countries are more than offset with the increase coming from the key demand centres—China, Middle East and India.”
IEA said it’s considering a release of its strategic stockpiles because near-maximum Opec output has failed to check rallying prices. “The market can take comfort that the IEA is watching developments very closely and is prepared to act quickly if necessary,” according to the report.
US fuel use was 1.1% lower in the four weeks ended on 30 May than at the same time last year, the US energy department said last week.