Energy Information Administration Cuts Oil Demand Forecast; Crude Price Falls $1.67 A Barrel

December 9, 2008 3:00 p.m. EST

Washington, DC (AHN) - The Energy Information Administration released on Tuesday its latest short-term energy outlook, cutting its forecast for global oil consumption due to lower economic growth prospects.

Crude oil prices traded lower on the news, down $1.67 a barrel to $42.04 in late day trading.

The EIA said global oil consumption is likely to be down by 50,000 barrels a day in 2008 and decline 450,000 barrels a day in 2009. If forecasts are accurate, it would mark the first time in about 30 years that global consumption fell in consecutive years.

The administration lowered supply expectations as oil producers' reign in production to support prices. It now expects OPEC's oil production to fall by 2 million barrels a day come the first quarter of 2009, compared to the 32.6 million barrels a day being produced in the third quarter of 2008.

The report predicted flat to lower energy prices over the next year due to sluggish global demand.

Residential heating oil for the current winter season is projected to average $2.53 a gallon, 24 percent lower than the 2007-2008 heating season.

As of Friday, the average price for regular-grade gasoline was $1.70 a gallon. Based on the EIA's oil outlook, it expects average gasoline prices to be roughly $2.03 in 2009.

The EIA's revised forecast is based on global GDP growth of 0.5 percent in 2009.

"If the world economy recovers sooner or is stronger than EIA now anticipates, oil consumption could decline at a slower rate or potentially increase instead, putting upward pressure on oil prices," the EIA said in the report.