The main reason oil skyrocketed to $150 last year was not necessarily because of high demand; rather, it was because of high expected growth rate. Well, it's no wonder oil has been chopped in third now that the forecast growth is nowhere to be found. Ominously for oil bulls, OPEC is now saying that non-OPEC growth is contracting:
Demand growth in countries outside the OECD has fallen by 90 per cent year-on year, OPEC said, and is now expected to increase by just 200,000 bpd in 2009.
“Unlike last year, non-OECD oil demand growth has lost 90 per cent of its strength this year,” OPEC said in its report.
Most of the bullish forecasts from a few years ago were pinnned on very high growth rates in developing countries. Oil demand in developed countries were always forecast to grow very slowly but it was the emerging markets that the market was excited about. Right now, emerging markets are falling off a cliff and, notwitstanding the fact that China is showing improvement of late due to high loan growth, I have a feeling we haven't seen the worst yet. Tags: energy