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By Samuel R. Avro on Dec 9, 2008 with no responses

Dept. of Energy Cuts Crude Oil Demand Forecast

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A new government report released on Tuesday said it expects global comsumption of oil to be further reduced in the coming months.

The Energy Information Administration (EIA) projected that consumption would decline by 50,000 barrels per day this year and by 450,000 barrels per day next year. That’s well below last month’s EIA projections which forceasted a 100,000 barrel a day rise until the end of the year and for consumption to remain flat in 2009.

The Energy Department greatly reduced their forecasted demand for crude oil in their latest monthly report.

However, “If the world economy recovers sooner or is stronger than EIA now anticipates, oil consumption could decline at a slower rate or potentially increase instead, putting upward pressure on oil prices,” the EIA cautioned in Tuesday’s report.

Crude oil for January delivery fell $1.65, or 3.8 percent, to $42.06 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange.

The EIA also noted that should these projections turn out to be correct, it would be the first time in three decades that world consumption declined in consecutive years.

With demand clearly slowing, all eyes are on OPEC and their planned Dec. 18 meeting which is expected to bring supply cuts.

OPEC President Chakib Khelil told the AP Saturday the group could announce a “severe” production cut and suggested the cartel may surprise the market in a bid to bolster prices.

The cartel controls 40 percent of the world‘s crude oil supplies.

The EIA is forecasting that oil prices average $51 a barrel in 2009, drastically off from last month’s projection of $63.50 a barrel.

Oil futures have dropped 66 percent this year, and are poised to have their largest annual decline since 1987.