The International Energy Agency (IEA), the energy watchdog for 28 developed counties including Ireland, today cut its 2010 world oil demand forecast, its first big cut in a year, on weaker-than-expected consumption in emerging markets and revisions to 2008 demand data.

In its monthly oil market report, the Paris-based agency said it expects total crude demand globally this year to average 86.38 million barrels a day, representing a 220,000 barrel-a-day downward revision from April and growth of 1.9%, or 1.6 million barrels a day, from 2009. It also estimated that the amount of oil the OPEC cartel will need to pump in 2010 on a weaker demand outlook as supply from outside the group rises by the largest annual amount in six years.

The Organization of Petroleum Exporting Countries will need to pump 28.7 million barrels a day to balance global oil demand and supply this year, the IEA said in its monthly market report today. That is 400,000 barrels fewer than estimated last month. The agency cut its estimate for total world oil consumption from 2008 through this year because of changes to historical data. “A baseline revision to demand and higher projected non- OPEC output are behind the revision,” the Paris-based agency said in the report. Iran and Malaysia have reported lower-than-expected oil demand in recent months, the IEA said, although China - - the main driver of the growth in world oil consumption - - was still supporting strong  demand.

Highlights of the May 2010 Oil Market Report:

Crude prices fell by over $10/bbl in early-May, the biggest weekly decline in 18 months amid an evolving Eurozone debt crisis and sell-off in global equity markets. Subsequent moves by EU finance ministers to guarantee liquidity for vulnerable economies saw partial recovery, with WTI futures recently trading at $76/bbl and ICE Brent at $79.50/bbl.

Global oil demand is revised down by 190 kb/d on average for 2009 and 2010, equating to 84.8 mb/d (-1.2 mb/d year-on-year) and 86.4 mb/d (+1.6 mb/d) respectively. Revisions stem largely from changes to non-OECD historical baseline data, as slightly higher GDP prognoses from the IMF are counterbalanced by a higher price assumption.

OPEC crude output rose by 40 kb/d in April, to 29.03 mb/d, sustaining a trend of largely stable supply since mid-2009. The ‘call on OPEC crude and stock change’ for 2010 is cut by 0.4 mb/d to 28.7 mb/d on lower demand estimates and higher non-OPEC supply. The ‘call’ peaks in 3Q10 at 29.4 mb/d but recedes in 4Q10 on rising non-OPEC supplies.

Non-OPEC oil supply fell to 52.4 mb/d in April, on seasonal output curbs. The 2010 forecast is revised up 0.2 mb/d to 52.3 mb/d on higher expectations for the US, Canada and China. Growth in 2010 of 0.8 mb/d is the strongest since 2004 and matches that for OPEC NGLs. The Deepwater Horizon drilling accident in the US Gulf has led to a major crude spill. Regional production is unaffected but the incident may lead to tighter safety measures and delay further offshore leasing.

OECD industry stocks rose by 7.3 mb to 2 709 mb in March, with divergent trends in crude and products across all OECD regions. Stock cover in days of forward demand rose to 60.5 days by end-March but stood 1.1 days below March 2009 levels. Preliminary April data show a sharp 47.4 mb build in onshore stocks and higher floating storage.

The 2Q10 global refinery crude run estimate is raised to 73.3 mb/d, up 450 kb/d from 1Q10 and 370 kb/d higher than in last month’s report. Sharply higher US crude runs in April, due to improved complex margins and a quick exit from seasonal turnarounds, combine with stronger expectations for Chinese throughputs.