A sharp slowdown in economic growth, particularly in the US, is hitting consumers and companies and forcing economic forecasters and analysts to slash estimates for global oil demand.
In a report to be published in the next few days, Barclays Capital has cut its estimates of world oil demand growth for this year and 2012 to reflect the dramatic slowdown in the United States and elsewhere.
The investment bank, which has been one of the most bullish forecasters of oil prices this year, now sees global oil demand increasing by 1.1 million barrels per day (bpd) this year to 88.68 million bpd.
Barclays Capital previously forecast a rise in oil demand this year of 1.56 million bpd and two months ago expected the increase to be as much as 1.7 million.
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Analysts say they expect other investment banks to follow Barclays Capital and cut their own estimates further.
Barclays Capital has also cut its forecast for oil demand growth next year, expecting an increase of 1.34 million bpd in 2012, compared with its previous forecast of 1.4 million bpd.
"Given the general state of the macro-economy, the state of oil demand does not seem particularly healthy," Barclays Capital oil analyst Amrita Sen said.
Fall in consumer spending
"Moreover, US GDP is 2 per cent lower than what everyone expected [or] knew of due to the revisions issued last week and our economists have reduced a cumulative 1.8 per cent of US growth over this year and next. Hence the revision."
Washington has cut sharply its estimates of growth this year and now says the US economy stumbled badly in the first half, coming dangerously close to contracting at one point. The Commerce Department said last week that the US economy expanded by just 0.4 per cent in the first quarter, a sharp downward revision from the previously reported 1.9 per cent gain, and grew at only a 1.3 per cent annual pace in the second quarter as consumer spending barely rose.
US consumer spending, which accounts for about 70 per cent of US economic activity, decelerated sharply in the second quarter, advancing at only a 0.1 per cent rate. In June, US consumer spending dropped for the first time in nearly two years.
Barclays Capital said it now expects real US gross domestic product (GDP) to increase by an average of 1.7 per cent in 2011 and global economic growth to average 3.8 per cent.
Barclays Capital's projections for oil demand growth this year are now below estimates from the world's top oil market forecasters, the International Energy Agency (IEA), the Organisation of the Petroleum Exporting Countries (Opec) and the US Energy Information Administration (EIA).
Both the IEA and EIA last month cut their oil demand growth forecasts for 2011, to 1.2 million bpd and 1.43 million bpd respectively, and analysts expect further revisions when they publish their latest estimates this month.