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LONDON/NEW YORK World oil demand is forecast to fall this year by much more than previously expected, as growth stalls in emerging powerhouses China and India and fuel consumption declines in the developed world.
Estimates see oil growth re-emerging in 2010, but analysts remain divided about how severe this year's demand contraction will be, as the short-term global economic outlook remains clouded.
The latest Reuters poll of 11 analysts, banks and industry groups shows oil consumption will decline by an average of 1.56 million barrels per day (bpd) in 2009 to 84.10 million bpd.
Demand is predicted to recover by 700,000 bpd in 2010, but will remain more than 1 million bpd below the 86 million bpd of demand seen in 2007, the last year consumption grew.
The forecast drop in 2009 oil demand is nearly four times larger than the 430,000 bpd drop analysts had expected in January, when Reuters last polled them.
In the earlier poll, analysts expected consumption in emerging markets to largely offset any contraction in the developed, Organisation for Economic Co-operation and
Development (OECD) nations.
"Demand has been weaker than most of us predicted in emerging markets in the last 6 months," said Francisco Blanch, head of commodities research at Banc of America Securities-Merrill Lynch.
The latest poll sees demand growing in countries outside the OECD by 120,000 bpd in 2009 compared with 650,000 bpd in January's poll. Demand in the OECD is expected to contract by 1.7 million bpd.
Surging oil demand from emerging economies helped push crude from around $20 a barrel at the start of 2002 to a peak above $147 in July 2008. Non-OECD growth grew by around 1.4 million bpd in 2008 alone.
Slowing global demand has pressured oil prices, which crashed to nearly $30 a barrel at the end of last year, before recovering to around $50 a barrel in April.
While analysts mostly agree that demand contraction will be more severe than first expected, their estimates vary significantly.
Eight out of the eleven polled predicted a decline of 1.2 to 1.5 million bpd, but others estimated demand would decline by at least 2 million barrels per day. The largest estimated decline of 2.4 million bpd came from the International Energy
The Paris-based IEA, adviser to 28 industrialised nations, said in its last monthly report it was cutting its projection for the fourth time since October due to weaker-than-expected demand data in the first quarter and falling global gross domestic product (GDP).
Crude stockpiles in OECD countries have risen rapidly in 2009, with more than 60 days cover now available despite Organization of the Petroleum Exporting Countries (OPEC) decisions to cut supplies by as much as 4.2 million bpd.
"The IEA estimate is very low, especially for the fourth quarter of this year," said Barclays Capital analyst Amrita Sen.
"They have perhaps overdone the fall in the United States, China and Japan, while the outlook for non-OECD countries is already starting to improve. Demand is weak no doubt, but it's not getting worse."
Other analysts think that it may still be too soon to call.
"We're sticking close to the IEA, because even that might be a rosy outlook," said Adam Sieminski, chief energy economist at Deutsche Bank AG, who forecasts a 2 million bpd fall.
"If we stuck to our rule of thumb, which is seeing oil demand grow at 2 percent slower than world GDP, then we'd be looking at a contraction of more than 3 million bpd this year. But negative GDP growth globally is unprecedented, so the normal formula might not work."
The U.S. government's Energy Information Administration (EIA) and OPEC both see 2009 demand falling by 1.4 million bpd.
RECOVERY IN 2010
OECD demand is expected to continue to decline slightly in 2010, according to the five analysts polled who have already published estimates, but the developing world is expected to emerge from the recession faster than OECD members.
"I think demand is bottoming out at the moment," said Blanch at BoA Securities-Merrill Lynch.
"Clearly there has been a bit of a downturn in non-OECD consumption but I think it will recover more quickly than OECD demand. China bought more cars in first-quarter of this year than the United States."
(Additional reporting by Joe Brock in London)