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Friday, 12 October, 2001, 16:52 GMT 17:52 UK
Oil demand set to slump
Oil worker in Kuwait
A slump in demand could flood the markets
World oil demand will contract sharply this winter, according to the International Energy Agency (IEA).

The 11 September terrorist attacks on the US have negatively impacted the global economy, dramatically reducing the world's demand for fuel, especially jet fuel.

And the IEA also warned that the slump in demand is likely to stretch into the beginning of next year as well.

Reduced demand risks flooding the markets with crude oil, causing prices to collapse.

The slump will pile pressure onto Opec, the oil cartel that exists to adjust supply to match demand and keep prices strong.

'Disconcerting situation'

The IEA has slashed its world oil demand forecast for the last three months of the year by 1.1m barrels a day to 76.2m barrels.

And the agency has halved its growth forecast for next year to 600,000 barrels per day, leaving estimated growth at just 0.8%.

"While there has already been a substantial reduction in global economic activity and a corresponding drop in oil demand before 11 September, the situation today looks even more disconcerting," said the IEA, which represents 25 major consuming countries.

And US-specific figures from the Energy Information Administration shows that the decline is sharpest in North America.

Demand for petrol and jet fuel in September led to a 4.7% decline for oil in the US compared to the previous year.

Opec dilemma

The Opec cartel, which produces about 40% of the world's crude oil is already mulling what to do about a sharp fall in crude oil prices.

The oil price has been hovering at about $20 a barrel for the past three weeks, well below Opec's target of at least $22 a barrel.

This would normally signal a cut in production in order to prop up prices.

But Opec is scared of appearing greedy when the world is suffering the threat of a recession, and it is cautious of adding to political tension at a highly sensitive time.

Opec's next scheduled meeting in on 14 November, but a decision on whether to take emergency action is expected next week.

Global cooperation

And Opec ministers are also reported to be seeking the help of producing countries outside of the cartel, such as Norway, Russia and Mexico.

A group of Opec ministers is rumoured to be meeting energy officials from non-member countries in Lisbon on Friday.

The oil price has been rising on the expectations of cuts over the past four days, but a lack of action would result in a further slump.

See also:

04 Oct 01 | Business
Opec faces up to low oil prices
10 Oct 01 | Business
Oil output cut 'imminent'
05 Oct 01 | Business
Oil prices bounce back
04 Oct 01 | Business
Premier faces Pakistan gas flare-up
27 Sep 01 | Business
Opec keeps oil production steady
25 Sep 01 | Business
BP cuts petrol prices
24 Sep 01 | Business
Oil prices sink to year low
17 Sep 01 | Business
Oil reverses post-attack surge
13 Sep 01 | Business
Attacks shake oil and gold prices
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