Global demand for oil dives

Last updated 12:00 18/05/2009

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World oil demand this year will post the sharpest annual decline since 1981 as the economy struggles to bounce back, the International Energy Agency (IEA) said.

Demand will contract by 2.56 million barrels per day (bpd) in 2009, the IEA, which advises 28 industrialised countries, said in a monthly report. It previously forecast demand would fall by 2.4 million bpd this year.

Oil market fundamentals remained weak and a rise in oil prices, which hit $60 a barrel for the first time in six months last Wednesday, was due to sentiment rather than evidence of higher consumption, the agency said.

"The oil price seems to have moved a bit higher in the past month largely on the basis of equity markets and sentiment about potential economic recovery," David Fyfe, head of the IEA's Oil Industry and Markets Division, said.

"But we're not seeing it in terms of the preliminary demand data for early 2009."

The IEA's forecast follows a lower demand projection from exporter group Opec. The IEA also said Opec was pumping more oil, a sign higher prices are prompting members to relax adherence to agreed output curbs. Oil fell below $57 after the report was released. At 1100 GMT on Friday US crude was down $1.24 at $56.78.

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- Reuters