Recent record high oil prices are beginning to depress demand for crude, an energy watchdog said on Tuesday. The International Energy Agency revised its forecasts for oil demand for the rest of this year and for 2008 lower in its monthly report according to the Financial Times.
Weaker demand will reduce pressure on the Organization of Petroleum Exporting Countries to increase production to cool down prices that recently approached the key $100-a-barrel level.
There are “strong signs that higher prices are depressing demand,” the watchdog said in its oil report for November. Oil prices have recently sharply this year taking them close to the 1980 oil-crisis highs in inflation-adjusted terms.
The IEA cut its forecast for oil demand in the fourth quarter of 2007 by a hefty 570,000 barrels a day to 87.1m b/d. Combined with a previous cut in its October report, the reduction in the demand forecast for this winter hit 900,000 b/d.
The IEA also reduced its estimate for the 2008 average by about 300,000 b/d to 87.7m b/d. Analysts from the private sector had previously criticized the IEA’s forecast as overly optimistic.
The energy watchdog also lowered significantly its estimate of the need for Opec oil this winter and next year. The IEA said that Opec will have to supply about 32m b/d during the fourth quarter, a 700,000 b/d cut from last month estimates. For 2008, it said that the oil cartel would have to deliver on average of about 31.3m b/d, a 500,000 b/d cut.
Read it here: Oil Demand Cools after Record Prices