PARIS (Reuters) - The International Energy Agency on Monday cut sharply its medium-term forecast for oil demand because of economic recession, but said the threat of a supply crunch had only receded, not gone away.
The adviser to 28 developed countries said in a report demand will expand by 0.6 percent, or 540,000 barrels per day (bpd) on average, between 2008 and 2014. Its previous forecast, issued in December, predicted annual growth of 1 million bpd.
Demand may be weaker depending on the pace of recovery from recession, which has cut fuel use in the United States, Europe and Asia. The IEA also lowered its supply forecasts, but postponed its prediction of a supply crunch.
“The deep economic recession that has spread worldwide in the past year has taken a severe toll on oil demand,” the Paris-based IEA said in its Medium Term Oil Market Report.
“This scenario paints a delayed picture of threatened ‘supply crunch’ later in the projection period.”
The IEA said its “working scenario” was based on higher Gross Domestic Product figures from the International Monetary Fund’s 2009 World Economic Outlook, which saw growth recovering to nearly 5 percent annually for 2012-14.
Oil demand will rise to 89 million bpd in 2014 from 85.8 million bpd in 2008, the IEA said. This year, consumption is expected to fall to an average of 83.2 million bpd, the fastest decline since the early 1980s.
A lower scenario assumed any rebound in the economy would be slower at around 3 percent annually by 2012, which the IEA said many considered the more likely outcome.
Under the lower scenario, the IEA forecast world oil demand could contract by 140,000 bpd a year in the medium term.
Oil has recovered to roughly $70 a barrel from a low of $32.40 in December and showed little reaction to the latest report from the IEA, which has already taken a more bearish view on demand than other forecasters.
Although demand has fallen, investment in new supplies has also shrunk. The IEA has repeatedly warned of a shortfall in energy supplies that could damage any economic recovery.
Its medium-term report in 2007 said there was a risk of a supply crunch by 2012.
In line with previous comment, the IEA said around 2 million bpd of new oil supply capacity could have been deferred indefinitely since late last year and a further 4 million bpd faced delays of 18 months or more.
“Whether we end up with a supply crunch again by mid-decade or with a more comfortable buffer of supply flexibility, it will depend largely on the pace of economic recovery and government action on energy efficiency,” said Nobuo Tanaka, the IEA’s executive director, at a news conference.
The biggest impact of lower spending has been on non-OPEC supply, which the IEA now expected to decline by 0.4 million bpd between 2008-14 compared with its previous prediction of 1.5 million bpd growth.
Even so, the IEA stopped short of saying the drop in non-OPEC supply was irreversible, blaming barriers to investment for sluggish production and saying there was enough oil left in the ground to allow output to expand.
Members of the 12-nation Organisation of the Petroleum Exporting Countries are expanding supplies more slowly than previously thought, in part because of weaker demand and lower income from oil sales.
The group will add 1.7 million bpd of additional supply capacity by 2014, almost half the increase previously expected. The majority will come from leading exporter Saudi Arabia.
Total capacity growth was now 4.2 million bpd compared with 5.5 million bpd in its last outlook, the IEA said, while the margin of spare capacity was expected to shrink to only 3-4 percent by 2013-14.
The IEA is careful not to predict oil prices, but said it was assuming nominal prices of $51 for this year, rising to $58.9 a barrel next year.
Additional reporting by Barbara Lewis/Alex Lawler in London, Editing by Peter Blackburn