The International Energy Agency cut global oil demand forecasts for this year and next as the economic recovery falters.

The Paris-based adviser reduced its estimate for 2012 consumption by 400,000 barrels a day, and for 2011 by 200,000 a day. Worldwide demand will rise by 1.2 per cent to 89.3 million barrels a day this year and by 1.6 per cent to 90.7 million next year.

The full resumption of exports from Libya will be "long and difficult," it said. "Global oil demand continues to expand at only a tepid pace," the IEA said today in its monthly Oil Market Report. "There are certainly growing concerns about the health of the global economy."

Brent crude futures have dropped 11 per cent from a 2011 peak of $127.02 a barrel reached in April, as Europe's sovereign debt crisis spreads and global manufacturing slows. Brent traded at about $113 today.

Worldwide gross domestic product will expand by 4.2 per cent next year, less than the 4.4 per cent previously anticipated, the agency said. Supplies from the Organization of Petroleum Exporting Countries may be sufficient to meet demand over the next three quarters without the need for more production increases, the IEA said.

The estimated demand for OPEC crude, or "call on OPEC," will average 30.5 million barrels a day in the fourth quarter, close to the group's production rate in August of 30.26 million a day, according to IEA estimates. Supply Disruption "That suggests that the recent spell of market tightening could moderate in the short-term, assuming that recent supply disruptions also recede," the agency said.

OPEC's 12 members collectively bolstered production by 165,000 barrels a day last month, led by increases in Saudi Arabia and Nigeria.That still left OPEC crude supply below the estimated level of demand for that oil this quarter, estimated at 31.3 million barrels a day, the report showed.

OPEC, responsible for 40 percent of global oil production, also trimmed demand estimates in its monthly report yesterday. The IEA predicted a slower resumption of output in Libya than the producer group. The North African nation will likely restore output to about 300,000 barrels a day in the fourth quarter, from zero last month, according to the IEA. OPEC forecast that Libya can reach 1 million barrels a day within six months and full
capacity within 18 months.

Bloomberg