The International Energy Agency (IEA) on Friday revised down its forecast for world oil demand in 2010, saying trade would be “sluggish” in rich nations and growth would come only from emerging economies. The IEA forecast that demand would be 1.44 million barrels per day (mbd) this year, compared to its 2010 estimate made last month of 1.47 mbd. The Paris-based agency also warned of possible “downside risks” to economic recovery in the member nations of the Organization for Economic Cooperation and Development (OECD), a grouping of 30 of the world's richest economies. “Oil demand recovery in the OECD will likely remain sluggish,” it said, adding: “Demand growth in 2010 derives entirely from outside the OECD.” The IEA said 2010 demand would rise 1.7 percent from 2009 to 86.3 mbd. The report also explained that much of that increase would come from Asian markets and some of it from Latin America and the former Soviet Union. In the United States, the world's biggest economy and largest oil consumer, the IEA said “demand continues to fall relative to a very weak baseline.” “The US economy remains fragile,” the IEA added. Oil prices extended their losses after the publication of the report, with New York's main futures contract, light sweet crude for delivery in February, falling 45 cents to $78.94 a barrel in trading. “The IEA is still more optimistic than the US Department of Energy that forecasts a demand increase of 1.08 mbd for 2010 and whose projection has also been revised slightly downwards,” Germany's Commerzbank said in a note. In its report, the IEA said top producers such as Russia and Saudi Arabia were now increasingly switching their supplies to growth markets in Asia away from traditional big buyers in Europe and the United States. “Saudi Arabia has been increasingly diverting both grades (Arab Heavy and Arab Medium crude oil) to meet growing domestic power generation and higher sales into Asian markets,” the report said. Saudi exports of Arab Heavy to Europe in the first nine months of 2009 were down to just 25 kbd - a crude oil measurement unit - from 90 kbd in 2008 and 110 kbd in 2007, while export volumes to Asia have gone up, it added. Russia is following a similar trend, with the inauguration in December of a new pipeline and Asian export terminal in eastern Russia and “a rerouting of crude oil from Baltic and Black Sea ports to the east” in 2010, the IEA said. The IEA study also reported a surge in oil prices earlier this month because of the Arctic chill in Europe and the United States, with prices rising to 15-month highs but later easing to between $78 and $80 per barrel. “The weather-related surge in prices that ushered in the new year may prove fleeting” because of a backlog in supplies,” the IEA said, adding that the market would look for “signs of economically-driven oil demand growth.” Political tensions in Iran, Nigeria and Russia have also helped boost prices in recent weeks by raising the prospect of supply disruptions, the IEA said, pointing in particular to a brewing Russia-Belarus oil transit dispute. Oil prices slip to $78 Oil prices ran up against forecasts for warmer weather, people who won't drive or spend money and a stronger dollar. Those factors combined for a fifth straight day of losses. Benchmark crude for February delivery slid $1.39 cents Friday to settle at $78 a barrel on the New York Mercantile Exchange. The price was down $4.75 for the week. In London, Brent crude for February delivery fell 71 cents to $77.11 a barrel on the ICE Futures exchange. In addition, the dollar was stronger, making it more expensive for holders of foreign currencies to purchase oil, which is priced in US dollar. Heating oil fell 3.69 cents to settle at $2.046 a gallon and gasoline slid 2.84 cents to close at $2.0454. Natural gas futures gained 10.3 cents to settle at $5.691 per 1,000 cubic feet. Inflation-adjusted wages fell 1.6 percent last year, the sharpest drop since 1990. Energy costs were an additional burden, shooting up 18.2 percent last year - the biggest jump since 1979 - led by a nearly 54 percent rise gasoline costs. And even as prospects remain bleak for jobs and income in 2010, energy prices are expected to rise again. On Tuesday, the government said gasoline should average $2.84 per gallon this year, up from $2.35 in 2009. For average motorists using about 50 gallons per month of gasoline, that means spending an extra $294 at the pump.
