Crude touched a 20-month low below $60 a barrel after the International Monetary Fund (IMF) cut its 2009 oil price forecast by nearly one third, citing softening global energy demand. "Weakening global demand is depressing commodity prices," the IMF said yesterday in an update to its World Economic Outlook, published a month ago. It sharply reduced its oil price projection for next year to $68 a barrel from its October forecast of $100 a barrel.
In its revised forecast, the IMF also cut its projection for global economic growth next year to 2.2 per cent from three per cent, and predicted a recession in most advanced economies, with the US and Eurozone economies expected to contract next year by 0.7 per cent and 0.5 per cent respectively. The IMF also cut the 2009 growth-rate it had projected for developing economies by a percentage point to 5.1 per cent.
The price of light crude oil on the New York Mercantile Exchange tumbled 6.9 per cent yesterday, touching $59.97 a barrel at its lowest point in the session. In Europe, ICE Brent crude lost 7.2 per cent. Crude prices have since rebounded above $60 as the US dollar lost ground today. Following the IMF's lead, some analysts also cut their 2009 oil demand projections. JBC Energy, a Vienna-based consulting firm, said it now expects next year's growth in global oil demand to be even more sluggish than this year's, rising by just 362,000 barrels per day (bpd) compared to a 403,000 bpd increase projected for 2008.
"Nevertheless, the risk still remains on the downside, in particular for non-OECD Asia," the firm said, citing an expected drop in Western demand next year for imports of Asian manufactured goods. According to JBC, non-OECD Asia's top five energy consumers - China, India, Indonesia, Taiwan and Thailand - are expected to account for 89 per cent of the region's oil demand growth this year and next. "A worsening economic environment in the US [and in other Western countries] would hit the economies of these countries disproportionately and result in lower oil demand," it said.
The continuing slide in oil prices from their all-time high of $147 a barrel in July have prompted widening concern that a pullback in energy investment could set the stage for future energy shortages and price spikes. Yesterday, the International Energy Agency, the energy watchdog for industrialised countries, warned that massive investment would be needed to keep the world adequately supplied with energy in the next two decades. It predicted that nominal crude prices would increase to more than $200 a barrel (or $120 a barrel adjusted for inflation) by 2030.