The Energy Information Administration released its Short-term Energy Outlook last week, lowering its expectations for crude and products demand in 2009, as well as revising down its price forecast for crude oil, gasoline and diesel. The agency said sliding consumption and building supply will create “a fairly loose oil market balance over the next 2 years.”

“The energy forecast is sensitive to economic conditions. In this forecast, U.S. real gross domestic product is expected to decline by 2 percent in 2009, leading to decreases in domestic energy consumption for all major fuels,” said EIA.

Regular grade gasoline in the United States is expected to average $1.87 gal this year, revised down by 16cts from the prior month, while the EIA forecasted the U.S. on-highway retail diesel fuel average 20cts lower than in December 2008 at $2.27 gal.

Total U.S. petroleum demand in 2008 shrank to its lowest level in five years due to combined effects of higher prices and a weakening economy, said American Petroleum Institute in its most latest Monthly Statistical Report.

At 19.4 million bpd, U.S. petroleum deliveries, a measure of demand, dropped 6.0 percent for 2008—the most rapid rate decline since 1980, the API said.

Gasoline deliveries for the year dropped 3.3 percent to an estimated 8.978 million bpd—their lowest level in five years. Deliveries of distillate fuel oil, which includes diesel fuel, were 3.952 million bbl in 2008, a drop of 5.8 percent versus 2007 levels. Jet fuel deliveries slid 6.1 percent for the year, while residual fuel oil deliveries dropped more than 14 percent.