The International Energy Agency, an adviser to the US and twenty five allies on oil policy, slashed its forecast for growth in demand this year by forty percent, saying the economy has yet to recover.
Consumption will rise by 250,000 barrels a day, less than last month's estimate of 420,000, the agency said. In its first forecast for 2003, the IEA expected demand to recover and increase by 1.1 million barrels a day, around the levels of the 1990s.
The slowdown has left the Organization of Petroleum Exporting Countries with its lowest output quotas in 11 years. Consumers may spend less after stock indexes in the US and UK plunged to five year lows this week, hurt by declining investor confidence after accounting scandals at WorldCom Inc. and Enron Corp.
“Because of the woes of the stock market, there is an increasing possibility demand will not be as strong,” said Lawrence Eagles, an analyst at GNI Ltd. “It's going to be very difficult for OPEC to expand output dramatically.”