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November 5, 2009

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Long-term oil demand expected to be lower

The International Energy Agency would "substantially" downgrade its long-term oil demand forecast in its annual energy outlook next week, the second cut in a row, The Wall Street Journal reported yesterday.

Efforts to better manage expanding oil demand in the developed world had been more effective than first expected, the paper quoted an insider as saying. It did not give any estimates on how deep the cut might be.

While the IEA's outlook is unlikely to affect the prevailing short-term view that the global economy's recovery from recession is reviving oil use, it is an important gauge for oil companies considering whether to build refineries or drill new wells.

The IEA and analysts have warned that a failure to make sufficient investments now could lead to another supply crunch in the next decade, particularly as economic growth in energy-intensive developing nations revives.

However, some are also growing increasingly bearish on the outlook for demand.

"The rise in global oil consumption over the next 10 years could be minimal," the paper quoted Philip Verleger, a veteran independent energy economist based in Colorado, as saying, noting that new energy-efficiency standards for everything from vehicles to building codes would keep a tight leash on demand.

In last year's World Energy Outlook the IEA cut its annual oil demand growth forecast to 2030 from 1.3 percent to 1 percent.

It also shaved 10 million barrels a day off its long-term forecast, projecting consumption in 2030 would hit 106 million barrels a day.


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