Oil consumption will this year fall at the sharpest pace since 1981 due to the crisis afflicting world economies, the International Energy Agency (IEA) said Thursday as it made new cuts to its forecast for crude demand. In its closely watched monthly survey, the Paris-based agency said it now expects global oil demand to fall 3 percent to 83.2 million barrels a day this year, or 2.6 million barrels a day less than in 2008. That is the ninth consecutive monthly cut the IEA has made to its oil demand forecast since last August, when the IEA had forecast oil demand would reach 87.8 million barrels a day in 2009. Oil futures ended mixed Thursday as a cautious market digested news of a cut in energy demand forecast by the IEA amid economic downturn. New York's main futures contract, light sweet crude for delivery in June, rose 60 cents from Wednesday to close at $58.62 a barrel. Brent North Sea crude prices for June fell 65 cents to end at $56.69 in London. US crude oil reserves declined by 4.7 million barrels last week. Energy prices have recently neared five- to seven-year lows in a global economic downturn. Refiners have slashed production of gasoline in anticipation of fewer sales, which is part of the reason why prices at the pump are going up even as other energy prices fall. The IEA has steadily lowered its forecasts as the financial crisis plunged the world into the deepest global recession since the Great Depression. Consumers, threatened with unemployment and often unable to get loans from cautious banks, have clamped down on spending wherever possible, particularly expensive items like cars. Faced with slumping sales, manufacturers have in turn responded by slashing production, all of which has caused the demand for oil to tumble dramatically over the past nine months. The last time oil demand fell this much was in the early 1980s, when skyrocketing US inflation spurred the Federal Reserve to hike interest rates, choking off economic growth. Meanwhile, the Kuwait's National Oil Company said it has temporarily halted oil exports because of the sandstorm that advanced over the Fifth Ring Road in Kuwait City on Thursday. The IEA's latest estimate represents a slight cut to its last forecast of a 2.8 percent drop in demand this year, and comes on top of a 0.3 percent fall in crude consumption last year. It will be the first time oil demand has fallen for two consecutive years since 1982-1983. Oil prices have enjoyed a rally in recent weeks, rising from near $50 a barrel earlier this month - and edged above $60 earlier this week - on hopes that the worst of the recession is over in the US, the world's biggest oil consumer. But US economic figures released Wednesday dampened those hopes. Retail sales unexpectedly fell in April, suggesting consumers are not yet reading to spend again. “New bullish macroeconomic sentiment has not yet produced signs of oil demand recovery and oil market fundamentals remain weak,” the IEA said. The agency said its forecast is premised on economic recovery “remaining elusive” this year. The latest economic data indicate that “the ‘demand green shoots', if any, continue to be buried under the thick ice of the current economic winter,” the IEA said. In the 30 rich countries belonging to the Organization for Economic Cooperation and Development, the IEA forecasts a 5.1 percent drop in oil demand this year to 45.1 million barrels a day, compared with last month's forecast of a 4.9 percent drop. In non-OECD developing countries, the IEA forecast a 0.4 percent slide in oil demand this year to 38.1 million barrels a day, down from last month's forecast of a 0.1 percent decline. It will be the first time oil demand has fallen in non-OECD countries since 1994, the IEA said.
