IEA: Slump In Oil Demand Moderating

PARIS (AP) -- The International Energy Agency on Thursday forecast that the slump in global oil demand in 2009 would be slightly less severe than previously expected, the organization's first upward revision to its estimates in 10 months as economic indicators suggest the recession may be past its peak.

The Paris-based agency said in its closely watched monthly survey that global oil demand would fall by 2.9 percent to 83.3 million barrels a day this year, or 2.5 million barrels a day less than in 2008.

In May, the IEA was expecting a 3 percent annual fall in demand, the sharpest rate of decline since 1981.

"These revisions do not necessarily imply the beginnings of a global economic recovery and may only signal the bottoming out of the recession," the IEA said in its report.

The IEA said it based its upward revision -- of 120,000 barrels a day -- on data from the 30 countries in the Organization for Economic Cooperation and Development, where there were signs of increased activity in the petrochemical sector.

The agency, however, noted that the rebound in petrochemicals was possibly due to restocking, as demand for transportation fuels remained weak, "suggesting that other economic sectors -- notably services -- are still constrained."

Since predicting in August that 2009 global oil demand would reach 87.8 million barrels a day, the IEA has steadily lowered its forecasts as the financial crisis plunged the world into the deepest global recession since the Great Depression.

Oil prices have been gaining quite steadily over the past weeks, rising from near $35 a barrel in March to highs above $72 on Thursday. Analysts say the rise can be attributed in part to hopes for a global economic recovery but mainly to the U.S. dollar's fall against other major currencies, as investors turn to commodities as a hedge against inflation and a safeguard from dollar weakness.

The IEA mentioned rising refinery activity and OPEC's decision in late May to stick to its current production targets as contributing factors to higher crude futures.

Benchmark crude for July delivery rose was up 72 cents at $72.05 by midmorning in Europe in electronic trading on the New York Mercantile Exchange. On Wednesday, the contract rose $1.32 to settle at $71.33.

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