World oil demand will dive by a hefty 2.4 million barrels per day in 2009, the International Energy Agency said on Friday, citing the impact of prolonged economic recession on energy use.
As the rate of contraction in oil consumption reached levels last seen in the early 1980s, it said outright demand for this year was expected to be 83.4 million bpd, around one million bpd less than in its previous monthly report.
This is a pretty exceptional period of demand collapsing, said David Fyfe, head of the oil industry and markets division at the IEA, the Paris-based advisor to oil-consuming countries.
He could not say whether there would be further downward revisions.
I think everyone out there is trying to gauge when the recession is going to bottom out. We can't say definitively that global GDP is not going to worsen, he said.
The expectations of a collapse in fuel consumption were not solely conjecture, the IEA's report said, and referred to early indications for the first quarter of this year of much lower demand in developed and non-developed countries than previously thought.
As demand has disappeared, stocks have swollen in developed countries and equated to 61.6 days of forward demand cover in February, a measure closely watched by producer group OPEC, which considers around 52 days comfortable.
The IEA said current forward cover was the highest since 1993, although it added absolute stock levels arguably provided a more representative view of the market because the demand figure has been cut so deeply.
The oil market was closed on Friday for the Easter public holiday, so there was no price reaction to the IEA's report.
COULD TAKE LONGER TO BALANCE MARKET
The Organization of the Petroleum Exporting Countries has agreed to reduce supply by 4.2 million bpd since September.
In last month's report, the IEA had said strict adherence with OPEC supply cuts already in place would shrink oil stocks in developed nations by around the middle of the year.
But Fyfe said the reality check of the first quarter -- and its lower demand than previously expected -- meant it would take longer for OPEC to balance the market, even assuming strict compliance.
We would probably (now) say it would take them until the end of the year, he said.
The call for OPEC crude in 2009 was 28.2 million bpd, the IEA said, 2.6 million bpd less than last year.
OPEC crude supply in March had averaged 27.8 million bpd, down 235,000 bpd from February, and output from the 11 members of the group bound by production targets had dropped to 25.57 million bpd -- down 245,000 bpd month on month, but still 720,000 bpd above target output.
The IEA assessed OPEC's compliance rate with agreed supply curbs at 83 percent in March, compared with the historical average of around 60 percent.
Analysts have said discipline was unlikely to increase much more as members of the group have said current oil prices of roughly $50 a barrel were a good compromise given the weakness of the economy.
The latest allocations from top oil exporter Saudi Arabia issued on Thursday and Friday showed it would keep supplies steady to some of its customers in May, but cut them to others.
Another limitation on production is underinvestment as lower oil prices dent profits and companies struggle to get credit lines.
The IEA repeated earlier warnings of a possible supply crunch once the economy recovers and energy use picks up and it reported a fall in non-OPEC supplies in addition to the voluntary OPEC output cuts.
For 2009, the IEA revised downwards its forecast for non-OPEC output by 320,000 bpd compared with its previous report.