Global oil demand will be lower than previously forecast in 2011 as high oil prices begin to have a toll on the global economy, the International Energy Agency (IEA) said on Tuesday. The IEA, which advises 28 industrialised countries on energy policy, also said OPEC's production fell only slightly in February as the organisation's members stepped in to compensate for the loss of Libyan output. But it added that as a result OPEC's spare capacity has fallen to its lowest level since late 2008, reducing its ability to cushion any new supply shock. "Empirically, past oil price shocks have shown a discernible effect on GDP. Supply shocks tend to be felt just a few months thereafter, while demand shocks usually have an impact roughly a year later," the IEA said in its monthly report. World oil supplies rose to an all-time high of 89 million barrels per day in February even as OPEC crude production fell due to the violent fighting in Libya. The agency lowered its outlook for the global demand growth by 10,000 barrels per day to 1.44 million barrels per day. "Even though limited volumes of regional production are affected so far, market perception (even if misguided) that Saudi Arabian facilities, the bulwark of OPEC spare capacity, could be targeted, has brought the geopolitical risk premium back with a bang", the report said. Spare production capacity from the Organisation of Petroleum Exporting Countries (OPEC) has fallen to the lowest since late 2008, at around 4 million barrels per day (bpd).
