U.S. Cuts Oil Price Forecast 19% on Demand Outlook

The U.S. reduced its forecast for oil prices next year by 19 percent as slowing economies may send global demand to its first drop in 25 years.

West Texas Intermediate crude oil, the U.S. benchmark, will average $51.17 a barrel in 2009, down from $63.50 estimated in November, the Energy Department said in its monthly Short-Term Energy Outlook, released today in Washington.

World demand will average 85.75 million barrels a day in 2008, down 50,000 barrels from 2007 and the first yearly decline since 1983, the report showed. The worsening economic outlook is the main reason for cuts in price and demand forecasts, said Tancred Lidderdale, an economist who supervises the report.

“The world economy and what that will mean for demand is the major focus,” Lidderdale said. “A decline in world oil consumption for next year is now showing up for the first time.”

The price for the West Texas crude will average $100.40 a barrel this year, down from $101.45 a barrel estimated last month, the report from the department’s Energy Information Administration showed. Oil futures in New York have dropped 71 percent to about $43 a barrel from a record $147.27 in July.

Global oil demand will average 85.3 million barrels a day next year, down 0.5 percent from 2008, according to the report. Last month the department forecast that demand would rise 40,000 barrels next year.

U.S. Consumption

U.S. oil demand will average 19.28 million barrels a day in 2009, down 200,000 barrels a day from 2008. Next year’s demand forecast was reduced by 30,000 barrels from last month. Consumption will drop 1.2 million barrels a day this year to an average 19.48 million barrels a day, the report showed.

Regular gasoline at the pump, averaged nationwide, will cost $2.03 a gallon in 2009, down 14 percent from $2.37 estimated in the November report. The fuel will average $3.27 a gallon this year, down 0.6 percent. Prices last week fell to $1.669 a gallon, the lowest since February 2004, the department said yesterday.

“The good news is that consumers will see lower prices,” Lidderdale said. “The bad news is that we still might not be able to afford them.”

The government cut its estimate of winter fuel costs from last month as prices fell. The heating season runs from October through March.

Heating oil users will spend an average $1,570 this winter, down 7.3 percent from $1,694 forecast last month and 20 percent lower than the average $1,953 spent by households last winter.

Homeowners using natural gas will see average heating costs for the season of $860, down 3.3 percent from $889 forecast in the November report. The estimate is up 0.2 percent from an average $858 last winter, the report showed.