IEA may trim world oil demand further

By Alex Lawler

LONDON (Reuters) - World oil demand is shrinking more quickly than first thought due to weak consumption in some major consuming countries, the International Energy Agency's head said on Monday.

The IEA may cut its forecast for world oil demand growth further, said Nobuo Tanaka, executive director of the agency which advises 27 industrialized countries, during the Reuters Energy Summit.

He also conceded that a forecast of around 100 million barrels per day (bpd) for oil supply in 2030 was "more reasonable" than a higher IEA estimate which some industry officials doubt can be achieved.

"We are saying that we may see a further demand slowdown for the June report," Tanaka said. "How much, I don't know."

"We think yes the demand is slowing, especially in OECD countries."

A further cut to 2008 demand would follow evidence that record prices are slowing oil use in the industrialized world. Further pressure could come as other countries, such as Indonesia, raise domestic fuel prices.

The IEA, whose forecasts are an industry benchmark, now predicts world oil demand will rise by 1.03 million bpd in 2008. It has more than halved its estimate from 2.2 million bpd in July 2007.

Its next Oil Market Report, which will include the latest supply and demand forecasts, is scheduled to be released on June 10.

Despite the surge in prices, Tanaka stopped short of calling on the Organization of the Petroleum Exporting Countries to raise output as present supply rates could relieve upward pressure on prices.

"If the OPEC countries continue at this kind of level, we project improvements in the fundamentals of the market and inventories may build," he said.

PEAK OIL?

The high price of oil, which hit a record of $135.09 a barrel last month, is prompting more interest in peak oil, the view that supply has reached or may soon hit a high point and then fall.

But Tanaka said that was not a problem yet.

"I am always asking my staff is there peak oil coming. Before 2030, we don't think we need to worry. We have abundant resources underground, so the issue is over ground."

The IEA has highlighted so-called above-ground hindrances such as lack of investment and limited access by foreign investors to some of the world's largest oil reserves.  Continued...