IEA demand forecast. Click to enlarge.

The pace of contraction is close to early 1980s levels, the IEA said, with a growing consensus that economic and oil demand recovery will be deferred to 2010.

Global oil supply fell by 400 kb/d in March, to 83.4 mb/d. Non-OPEC supply fell by 170 kb/d, with a 220 kb/d dip in the OECD partly offset by higher non-OECD output. 2009 non-OPEC output is revised down by 320 kb/d, largely due to lower biofuels output, and weaker 1Q09 crude production in Asia. Non-OPEC output now falls from 50.6 mb/d in 2008 to 50.3 mb/d in 2009.

OPEC crude supply in March averaged 27.8 mb/d, down 235 kb/d versus February. OPEC-11 output stands 720 kb/d above a 24.9 mb/d target that was retained at OPEC’s 15 March meeting. Supplies stand at five-year lows, amid exceptionally weak demand, with Ministers meeting again on 28 May. Effective spare capacity is around 5.5 mb/d. The call on OPEC crude and stock change is 28.2 mb/d for 2009, 2.6 mb/d below 2008 levels.

OECD industry stocks rose by 7.5 mb in February to 2,743 mb, 7.2% above a year ago. Lower North American products only partially offset a rise in Pacific crude stocks. An upward revision to January inventories, plus increasing February stocks and weaker forward demand, pushed end-February stock cover to 61.6 days, 7.9 days above a year ago.

Lower global crude runs are expected to persist through 2Q09 and into 3Q09. Demand revisions, weak middle distillate cracks and reports of bulging product inventories in several markets, suggest a further painful period of weak margins as refiners adjust operating rates to the 2.8% decline in demand now expected for this year.