World oil demand will rise less than expected in 2008 because of record prices and slower growth in the United States and elsewhere, the International Energy Agency said on Tuesday. Consumption will rise by 1.03 million barrels per day (bpd), 230,000 bpd less than the previous forecast, the IEA said. The agency has more than halved its estimate from 2.2 million bpd in July 2007 and may cut it further. “This report sees further downward adjustments to demand, and they may not be the last,” said the IEA, adviser to 27 industrialized countries, in its monthly Oil Market Report. “Despite an aggressive cut last month in our US demand forecast, further downward revisions are needed this month.” The report adds to evidence that record-high prices are slowing oil use in the industrialized world and also signals pressure on demand in some emerging countries. World oil prices slipped on Tuesday from record heights on profit-taking as the International Energy Agency cut its forecast for growth in global demand, traders said. Oil prices have more than doubled in the past year and rocketed almost 25 percent since the start of 2008, when they blasted through the $100 barrier. On Tuesday, New York's main oil futures contract, light sweet crude for June delivery, fell 56 cents to $123.67 per barrel. The contract had Monday hit a record high $126.40 on massive speculative interest and a raft of supportive factors, analysts said. London's Brent crude contract for June fell 40 cents to $122.51. “Oil futures have continued to correct lower amid a downbeat oil demand forecast by the IEA,” said Sucden analyst Nimit Khamar. Sustained weakness in European consumption could prompt the IEA to lower its demand forecast further. At the same time, reassessment of fuel subsidies in countries such as Indonesia may create more downside risks. “We're concerned that the removal of subsidies could cause demand shocks in some non-OECD countries,” said Lawrence Eagles, head of the IEA's Oil Industry and Markets division. “Certain non-OECD countries can no longer afford the subsidies and have therefore reached tipping point.” Several countries such as Indonesia, are reassessing the costs of keeping oil price subsidies in place. Indonesia's subsidies on gasoline, diesel and kerosene are estimated to reach $12 billion in 2008, the IEA said. Demand growth from emerging countries overall remains strong at 3.7 percent or 1.4 million bpd in 2008, led by China and the Middle East, the agency said.
