Growth in oil demand is forecast to fall by as much as 60 per cent next year amid economic turmoil, the International Energy Agency (IEA) said.
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Yesterday's report from the IEA, the organisation based in Paris that advises 28 major industrialised nations, trimmed crude demand by 100,000 barrels per day (bpd) for this year along with decreasing next year's growth prediction.
The price of Brent oil, the European benchmark, briefly rallied yesterday rising to US$107 per barrel after the US announced it would bolster the economy with low interest rates, helping to erase losses from the day before when oil dipped below $100. But by 6pm local time it had slipped back down to $104.
Amid the volatility, the head of the group that fosters dialogue between producers and consumers advised calm.
"Let's discuss it among producers and consumers and get a common assessment … See where the sand comes down," said Noe van Hulst, the secretary general of the International Energy Forum, the Riyadh-based organisation that counts Opec countries and the US, China and other major consumers among its members.
"Until there's a clear picture, we should be very cautious in not fuelling any extra uncertainty."
The IEA's monthly report trimming its demand growth forecast followed a report from Opec the day before cutting its growth prediction by 150,000 bpd.
The cuts have fuelled speculation that Opec, which supplies 40 per cent of the world's oil and counts Saudi Arabia and the UAE among its 12 members, could opt to decrease output.
"We are in big turmoil and uncharted waters," said Mr van Hulst. "Everybody has to see how the world economy will pan out in the next few weeks and months." Spare capacity in the group stands at a mere 3.3 million bpd after Saudi Arabia opted to increase output to its highest levels in three decades.
The world's top oil exporter pumped 9.8 million bpd last month, according to the IEA report. The kingdom burns some oil to meet peak electricity demand.
Yesterday's high of $107 followed Tuesday's announcement from the Federal Reserve it would keep interest rates close to zero for the next two years.
