Topic: IEA 2010 oil demand projection looks optimistic
The IEA’s forecast for a 1.7 percent gain in global oil consumption next year may be too optimistic, based on the historic relation between gross domestic product and energy consumption.
The IEA’s projections for oil demand growth will trail the World Bank’s forecast for GDP growth by 0.8 percentage point, the least in 14 years. Since 1997, oil use has followed GDP by an average of more than 2 percentage points and in 2006 the spread widened to 3.9 percentage points.
The Paris-based IEA, which coordinates energy policy in 28 developed countries, releases a monthly oil market report that has become a benchmark for analysts and traders of futures. The agency was set up in 1974 in response to the Arab oil embargo.
“There’s been a remarkable correlation between GDP and oil demand growth,” said Edward Morse, head of economic research at LCM Commodities LLC in New York. “The IEA numbers are implausible.”
World wide consumption of crude oil will increase by 1.4 million barrels a day to 85.2 million barrels a day in 2010, the Paris-based agency said in a monthly report on July 10. The gain would follow a two-year decline in demand, the first drops since the early 1980s.
The Organization of Petroleum Exporting Countries projects a 500,000 barrel-a-day, or 0.6 percent, increase to 84.3 million in 2010, according to a July 14 report. The U.S. Energy Department forecast a 940,000 barrel-a-day gain, or 1.1 percent, to 84.8 million, the Short-Term Energy Outlook showed on July 7.