PARIS -- World oil demand is growing more slowly than expected as Asia's year-long economic crisis saps the region's once robust thirst for energy and producers struggle to cut output, the International Energy Agency said.
The IEA cut its forecast of daily world demand by 100,000 barrels to 75 million. While consumption is expected to rise from 73.8 million a day last year, the agency's forecast for 1998 is down almost 1 percent from 75.6 million just six months ago.
Oil prices are down more than 20 percent in the past year to less than $14 a barrel and could be headed lower unless producers slash output. So far, the glut has survived even after supply was cut by more than 2 percent in April. The IEA's forecast of weaker growth "paints a grim picture for demand," said Peter Gignoux, head of oil trading at Salomon Smith Barney in London. Koreans have cut energy use, Japanese power plants are burning less oil and China's growth could slow, the Paris-based agency said. That will reduce demand in several Asian countries that in recent years were among the fastest growing energy users. The IEA, which was set up during the energy crisis of the 1970s to monitor supply and demand for the 23-nation Organization for Economic Cooperation and Development, said oil demand is growing more slowly as Asian demand, excluding China, declines. Brent crude oil futures fell as much as 55 cents, or 4 percent, to $13.67 a barrel on the International Petroleum Exchange. Compounding the demand problem is rising supply, particularly from the Organization of Petroleum Exporting Countries. Based on IEA forecasts for non-OPEC supply and Bloomberg estimates of current OPEC production, the world will be pumping about 77 million barrels a day by the fourth quarter. Demand from Asia, excluding China, Japan and South Korea, will be 9 million barrels a day this year, down 100,000 from last year and 100,000 less than the IEA's forecast last month. Japan, South Korea, Australia and New Zealand will consume a total of 6.6 million barrels a day, down from 6.7 million last year. "On the demand side, we were expecting too much from Asia, especially Korea and Indonesia," said Gareth Lewis-Davis, an analyst at the IEA. And it could get even worse. Tumbling currencies in many Asian nations have increased the cost of importing dollar-priced oil and refined products, and slumping economies reduce consumption of energy needed to run factories, power plants and automobiles. …