LONDON, Oct 11 (Reuters) World oil demand will grow more slowly than expected in the fourth quarter as record-high crude prices prompt some consumers to seek alternatives, the International Energy Agency said on Thursday.
The IEA, adviser to 26 industrialised countries, said in its monthly Oil Market Report demand will rise by 2.03 million barrels per day in the fourth quarter from a year ago, 320,000 bpd less than previously expected.
''There has been a bit of substitution going on, natural gas for oil, which is essentially a price effect,'' Lawrence Eagles, head of the IEA's Oil Industry and Markets Division, told Reuters.
''There have also been some small downward adjustments to economic growth, which have also played a role.'' The cut in fourth-quarter demand follows a similar move by the IEA last month and points to a slightly lower need for oil from the Organization of the Petroleum Exporting Countries in the final months of 2007.
OPEC is set to raise output in November, a move that followed months of pressure from the Paris-based IEA which has been worried about the impact of record oil prices above a barrel on consumers.
The IEA trimmed its assumptions about economic growth ''slightly'' ahead of new forecasts from the International Monetary Fund and other organisations in the wake of the U.S.
subprime mortgage crisis.
Its lower fourth-quarter demand growth estimate indicates the agency may be expecting the economy to slow by more than expected, analysts said.
''The IEA may be anticipating more of an economic downturn than the consensus currently thinks,'' said Geoff Pyne of EnerpyLtd.com.
SLOWER GROWTH According to a report from Italian news agency ANSA on Monday, the IMF's World Economic Outlook, to be issued next week, will cut its forecast for world growth next year to 4.8 percent from 5.2 percent.
Oil prices pared an earlier gain after the IEA report was released and later rose. U.S. crude was up 97 cents at .27 a barrel.
The IEA now expects world oil demand to average 87.64 million bpd in the last quarter of 2007, lower than the 87.8 million bpd expected in September.
It also trimmed its forecast for global demand growth in the first quarter of next year, lowering the figure by 50,000 bpd to 2.55 million bpd, although the outlook for the full year was left unchanged.
Demand for OPEC oil in the fourth quarter is now expected to be between 32.2 million bpd and 32.7 million bpd, up to 200,000 bpd less than previously forecast, the IEA said.
Even after the revision, the IEA still sees higher demand than some other forecasters. OPEC expects oil consumption in the fourth quarter to average 87.08 million bpd.
Despite slower demand growth and OPEC's supply boost of 500,000 bpd to start on Nov. 1, the IEA remains concerned that supply may tighten later in the year as seasonal demand rises.
Oil inventories in the OECD fell by 21 million barrels in August to equal 53.5 days of demand, below the five-year average, the IEA said.
''Despite the wide range of demand forecasts, there is a broad consensus that supplies will get tighter this winter,'' said the report.
REUTERS SR HT1932