Demand for oil in its many forms has been buffeted by the world's growing economic malaise in recent months, and is now widely expected to fall by more than 1 million b/d in 2009.

Changing outlook for 2009 world oil demand (million b/d)

The demand drop, which started late last year and could last into 2010, may be the biggest the world has seen for a generation and is now being felt in all corners of the world.

One of the most apparent aspects of the downturn has been the speed with which it has taken place, and how rapidly this has forced forecasters to slash their estimates of oil demand.

For example, as recently as September last year the International Energy Agency was expecting world oil demand to rise by nearly 900,000 b/d in 2009.

Five months later, in its February 2009 report, the agency's projections had done a complete about-face and were now pointing to 1 million b/d fall in consumption.

In outright terms, the IEA has now reduced its estimate of demand this year by more than 3 million b/d since it published its first projection in the middle of 2008.

By comparison, during the Asian economic crisis of 1998, the last big economic downturn to hit oil demand, the agency only reduced the same figure by around 1.46 million b/d.

These projections are not unique to the IEA, with other market-watchers seeing at least as big a fall, and some painting an even gloomier picture.

Clearly, then, we are looking at one of the biggest and fastest changes to the oil demand outlook the world has ever seen, and it is no surprise that in the physical oil market it is leading to a noticeable drop in demand for crude oil from refiners.

 In terms of the regional impact, the areas where demand destruction have been occurring initially correlated fairly closely with the general macro-economic slowdown, with most of the gloom coming from the developed countries which make up the OECD.

The IEA, whose members make up the bulk of the group, expects demand from the OECD to fall by as much as 1.6 million b/d this year.

Some of this is not new, as demand in many western European countries has been essentially stagnant or even falling slightly for a number of years, but the size of this year's expected contraction is unprecedented.

Just as the financial collapse in the western world is proving increasingly contagious to the rest of the world, evidence has also been growing of oil demand proving less robust than expected in many parts of the world outside the OECD.

Although the OECD still consumes the majority of the world's oil, non-OECD countries have been responsible for almost all the growth in oil demand in over the last few years, so any serious slowdown there will be keenly felt in the crude market, one of the world's most global commodity markets.

It is also worth looking at which refined product categories have been particularly hard hit.

Perhaps unsurprisingly, transport fuels stand out as one obvious area, with hard-hit consumers in the western world driving less and flying less than they were a year ago.

Global trade has also fallen sharply, which has an immediate impact on the amount of fuel oil needed as bunker fuel to power ship's engines across the world's oceans.

The trade drop also goes further than that. As analysts Newedge pointed out in a February report, as there is a near-perfect correlation in recent years between container trade through US West Coast ports and total demand for diesel in the whole of the US.

In other words, if fewer Asian goods are arriving in California, the US will need fewer trucks to distribute those imports around the country.

And if people are buying fewer goods, then factories will be making fewer of them, which again has a direct impact on energy demand of one form or another.

Demand for petrochemical products, often seen as a better barometer of the world's general financial health than any other commodity, has been battered in all of the major regions, pushing some of the biggest players into financial difficulties.

So don't look to naphtha and other petrochemical feedstocks to lead total oil product demand on an upwards path just yet.

In March one of the key inter-regional arbitrages opened to spur the flow of naphtha from Europe to Asia, but this was more due to the weakness of the European market than any notable strength in Asia.

With weakness across the barrel, refining margins have also taken a hit, leading to reports of run cuts at several of the less complex refineries.

With most economic pundits still unable to predict with any confidence when the world's economic gloom might start to lift, it's hard to believe we have heard the end of the bad news for oil demand just yet, with most people expecting more pain, and possible deeper run cuts for refiners, in the months ahead.