IEA says oil demand down, supply cut counterproductive

World oil demand will grow by less than expected says the International Energy Agency, and production cuts could be harmful.

LONDON // World oil demand will grow by less than expected this year and next, a result of high prices and weaker economic conditions, the International Energy Agency said today. The agency lowered its world oil demand growth forecast for the year by 100,000 barrels per day to 690,000, and also trimmed its forecast for next years' global demand growth by 40,000 barrels to 890,000. "High prices are having an impact on demand," said David Fyfe, of the IEA, adding that developed ecomomies "are feeling the impact".

Global supply fell by 1 million barrels a day in August to 86.8 million barrels, the IEA said in its September Oil Market Report. This was due in part to North Sea maintenance, lower Opec supply and disruptions to the Baku-Tbilisi-Ceyhan pipeline. The IEA, adviser to 27 industrialised countries on energy policy, also cut its forecasts for oil supplies from countries outside Opec. The agency cut its non-Opec supply forecast by 180,000 barrels a day for this year and by 85,000 barrels for the next.

The report was drawn up before Opec announced its surprise production cut in Vienna last night, by 1.2 million barrels a day, equal to 4.3 percent of the group's total, in an effort to stop the slide in oil prices over the past three months. Today the IEA warned the cut was counterproductive for the global economy. Mr Fyfe said oil prices remained 'very high'. *Reuters