PREVIEW-EIA may forecast weaker oil demand growth in 2012

Mon Jan 10, 2011 10:19pm GMT

* WHAT: EIA'S Short-Term Energy Outlook

* WHEN: 12:00 p.m. (1700 GMT) on Jan. 11

* Analysts say 2012 oil demand growth won't be as strong

* China's move to rein in inflation may cool oil demand

* Higher oil prices seen cutting into some fuel demand

By Tom Doggett and Ayesha Rascoe

WASHINGTON, Jan 10 (Reuters) - The U.S. government releases on Tuesday its first outlook for 2012 global oil demand, which analysts said may show weaker crude demand growth for next year, especially if China cools its fuel consumption.

The U.S. Energy Information Administration's report is the first of three major oil supply and demand forecasts to be released this month. The Organization of the Petroleum Exporting Countries is set to release its its monthly outlook next week on Jan. 17, followed by the International Energy Agency's report on Jan. 18.

The EIA's report gives traders their first glimpse of the agency's energy projections for 2012.

Last month, the EIA lowered its forecast for 2011 world oil demand growth, revising its outlook down 10,000 barrels per day to a 1.43 million bpd increase.

The agency projected that world oil demand would hit 87.78 million bpd in 2011, compared with 86.35 million bpd in 2010.

That put the oil demand growth rate at 1.7 percent for this year, down from the 2.4 percent growth in 2009. Oil consumption grew by a higher percentage last year because demand was down significantly in 2009 during the worst time of the global recession.

Matt Smith, an energy analyst for Summit Energy in Louisville, Kentucky, said while total global oil demand will increase in 2012, the growth rate could be at a slower pace if China's attempts to rein in inflation cools the developing nation's booming economy.

"I don't think we're going to be going gangbusters into 2012," Smith said.

Tim Evans, an energy analyst at Citi Futures Perspective in New York, said the 1.7 percent demand growth the EIA expected for 2011 matches the average annual growth rate from 1993 to 2007.

"So while the market may treat rising demand as a bullish phenomenon, this is really nothing extraordinary," he said. "We'd expect to see average growth in the years ahead that runs below the long-term average more than it runs above it."

Evans also cautioned that higher oil prices could cut into oil consumption. "Higher prices are a drag on demand growth," Evans said.

Oil settled at $89.25 a barrel on Monday after hitting the highest level in more than two years last week.

The IEA last month raised its world oil demand growth forecast for 2011 to 1.32 million bpd, with consumption expected to hit 88.8 million bpd.

Both the EIA and the IEA remain more bullish on world oil demand than OPEC, which said it expected world oil demand this year to increase 1.18 million bpd to 87.11 million bpd. (Reporting by Tom Doggett and Ayesha Rascoe; Editing by Marguerita Choy)