NEW YORK (AP) — The rout in oil prices advanced Friday after the International Energy Agency lowered its forecast for global oil demand next year.
In its monthly oil report, the agency said global oil demand in 2015 will grow by 900,000 barrels a day — 230,000 less than previously forecast — to 93.3 million.
“While demand growth is still expected to gain momentum in 2015 from 2014, the acceleration is now looking more modest than previously foreseen, in line with the ever-more tentative pace of the global economic recovery,” the IEA said.
The benchmark U.S. oil price tumbled more than 3 percent, at one point dropping to $57.34, the lowest intraday price since May 13, 2009, when the global economy was still in recession. Around midday in New York, it was down $2.063, or 3.4 percent, at $57.90. Brent, the international standard, was down $1.72, or 2.7 percent, at $61.96.
The IEA said several years of record high prices have “induced the root cause” of the rout in oil prices in recent months. Production in countries outside of OPEC, such as the U.S., has surged to its highest growth ever while the growth in demand is at five-year lows. The fall in oil prices gathered pace in late November when OPEC left its output target unchanged.
The agency also dampened expectations that the fall in oil prices will automatically be a boon for the global economy.
“The adverse impact of the oil price rout on oil-exporting economies looks likely to offset, if not exceed, the stimulus it could provide for oil-importing countries against a backdrop of weak economic growth and low inflation,” the IEA said.
It highlighted the impact on Russia, which has been particularly hard hit by the market sell-off.
Others, however, believe the benefit to the consumer outweighs the negatives for energy producers. In a note last month, Barclay’s estimated that a 20 percent decline in gas prices in the U.S. results in $70 billion of savings for consumers, money that helps restaurants, clothing stores, movie theaters and other businesses that depend on discretionary spending. Gas prices have dropped 30 percent since June, to $2.60 per gallon from this year’s peak of $3.70.
Barclays said those gains more than offset an estimated reduction of $40 billion in capital spending by the energy sector.