Has oil demand peak in developed world?

4 February 2010

Published by John King

The International Energy Agency (IEA) has this week declared that demand for crude and associated products will never again reach levels seen in 2006 and 2007 in industrialised nations.

Speaking exclusively to Reuters, Fatih Birol, chief economist at the IEA, declared that while the global recession has caused a dip in demand, structural changes in the way the developed world uses energy will result in a slow but continual demand for oil and products such as heating oil, petrol and diesel.

"When we look at the OECD countries - the US, Europe and Japan - I think the level of demand that we have seen in 2006 and 2007, we will never see again," he predicted. Such comments have been expressed by other analysts, but never before has such an influential policy adviser made such a claim.

The Paris-based IEA helps to shape national energy policy in 28 countries around the world. Mr Birol insisted that among industrialised nations, continual moves towards greener energy sources will increasingly offset demand for oil-based fuels.

His comments were made against a backdrop of sustained weakness in demand for crude in the US, the world's largest energy consumer.

With the cold weather seen in recent weeks abating, both the Energy Information Administration (EIA) and the American Petroleum Institute (API) showed a rise in crude inventories last week.

Both groups recorded larger than anticipated stock rises, with a 2.3 million-barrel and 2.7 million-barrel build revealed by the EIA and API respectively.

As in previous weeks, the publication of weak demand data had a dampening effect on crude oil prices, while heating oil prices also fell.

While both commodities had risen on Tuesday (February 2nd), the demand data sent crude prices back below $77 a barrel, while heating oil prices had dipped below $2.03 a gallon at the close of trading on Wednesday.