New York (Platts)--20Apr2009

Though a deluge of downward demand revisions was unleashed on global oil
markets over the past week, prices were remarkably stable, with both the NYMEX
light sweet crude and ICE Brent contracts clinging to the $50/barrel level.

Divergent demand projections, predicated on markedly different global GDP
estimates, and a relentless stock-building trend in the US despite supply cuts
by OPEC and lower non-OPEC production, have left oil markets range bound.

OPEC agreed in December 2008 to cut production by a cumulative 4.2
million b/d. It used estimated September production of 29.045 million b/d as a
baseline for the cut, arriving at a target output level of 24.845 million b/d
for the 11 members--not including Iraq--bound by quotas.

A Platts survey estimated OPEC-11 output at 25.61 million b/d in April,
765,000 b/d above target, but down 1.9 million b/d from 27.51 million b/d in
December.

Despite OPEC's attempt to lower global supply as demand deteriorated over
recent months, US crude stocks have soared to historically high levels. US
commercial crude stocks in just the past three-and-a-half months have
increased 41.324 million barrels to 366.743 million barrels, an 18.5-year
high, according to the most recent data from the US Energy Information
Administration.

But working in OPEC's favor was another set of downward revisions in
non-OPEC supply estimates. The International Energy Agency brought down its
estimate for 2009 non-OPEC supply by 320,000 b/d to 50.26 million b/d while
EIA left its projection unchanged from the previous Short-Term Energy Outlook
at 49.77 million b/d, 490,000 b/d below the IEA figure.

OPEC, however, revised its estimate of non-OPEC production up 29,000 b/d
to 50.61 million b/d, the most optimistic of all projections.

The IEA April 10 revised down its demand projection by 1 million b/d to
83.43 million b/d, having altered its global GDP growth assumption to minus
1.4% from 0.5%. If oil demand were to drop to 83.43 million b/d, that would be
a decline of 2.4 million b/d year-over-year.

"The pace of oil demand contraction is approaching rates last seen in the
early 1980s, but a repeat of the four-year consecutive fall seems unlikely at
this point, although an emerging consensus sees economic, and hence oil
demand, recovery likely deferred to 2010," the IEA said in its April Monthly
Oil Market Report.

Of the 2.4 million b/d drop in demand growth currently projected by the
IEA, the US accounted for 890,000 b/d of the decline. IEA estimated that US
demand would drop to 18.61 million b/d in 2009.

EIA PROJECTS OECD DEMAND TO DROP, NON-OECD DEMAND TO RISE

While the IEA's revision to global GDP growth puts the IEA closer in line
with other economic estimates, it also suggests that the International
Monetary Fund in its semi-annual World Economic Outlook due out this week is
apt to slash its assumptions by a wider-than-usual margin. The IMF could
revise its estimate for global GDP by as much as 2.25 percentage points,
suggesting growth of minus 1.75% for 2009 based on previous revisions in oil
demand by the IEA.

EIA based its April 14 demand revisions on global GDP growth of minus
0.8%, well off consensus estimates. EIA estimated total oil demand growth
would drop by 1.35 million b/d to 84.09 million b/d in 2009, a downward
revision of 180,000 b/d from its previous Short-Term Energy Outlook.

"Consumption is expected to fall by 1.6 million b/d in the OECD countries
and rise by 270,000 b/d in non-OECD nations," EIA said. "The bulk of the
decline is expected to be concentrated in the first half of the year."
Of the 1.35 million b/d decrease in global demand growth, the US would account
for just 430,000 b/d of the decline, but 460,000 b/d below the IEA projection.

EIA's demand growth estimate puts the US agency 660,000 b/d above the IEA
projection for 2009.

EIA's revised demand growth estimate did put the US agency in line with
OPEC's numbers, which were released April 15. Both EIA and OPEC were working
off a GDP growth assumption of minus 0.8%, a downward revision of 0.6
percentage points. OPEC revised down its oil demand estimate by 430,000 b/d to
84.18 million b/d, 750,000 b/d above IEA's projection.

Should the IEA's most recent demand growth projections play out, this
would be the single largest decline in oil demand, far outstripping the one
that occurred from 1980 to 1981.

Based on historical data from EIA, global oil demand growth fell 2.17
million b/d to 60.914 million b/d in 1981. Of that decline the US accounted
for 1.457 million b/d, or 67%, of the drop-off compared to current estimates
that would suggest America would only represent 32% of the decrease based on
EIA's numbers, but 37% based on IEA?s projections.

A drop in oil demand of the magnitude the IEA is projecting would aptly
reflect the decline that the IMF is forecasting for global GDP before the next
set of revisions are released. The IMF expects global GDP to fall 2.9% to 0.5%
from 2008 to 2009 and if the revision is as large as the IEA's oil demand
projections, global GDP could fall close to 5% year-over-year and that would
probably put the IEA closer to the appropriate demand estimate than EIA or
OPEC.

--Linda Rafield, linda_rafield@platts.com