The International Energy Agency (IEA) has cut its estimate of expected global GDP growth in 2009 to just 1.2%. It therefore expects the world to record its first back-to-back annual decline in oil demand since 1982/3.
It says oil production last month was unchanged at 86.2mbd, despite OPEC cutbacks and the first fall in Russian supply since 1996. It estimates OPEC pumped 30.9mbd in December, down 300kbd from November. Saudi Arabia cut 450kbd, so some other OPEC countries continued to cheat on their quotas.
Looking ahead to 2009, the IEA expects average consumption to be 85.3mbd, down 0.6% from 2008. China's demand is expected to grow just 1.3% to 8mbd, as lower exports slow the economy. So OPEC will only need to produce 29.9mbd - 1mbd less than in December.
For the moment, oil markets remain in contango, as players buy oil today and store it in the expectation of higher prices by the summer. But with 80mbd now in storage as a result, in addition to normal stocks, prompt prices will remain under pressure in the short-term.