The Energy Information Administration released its Short-term Energy Outlook for March last week and again revised lower its projection for world oil demand in 2009 due to an ongoing global economic contraction. The EIA also adjusted its price outlook for retail gasoline up, while dropping its forecast for diesel prices this year.

The key feature markets are focused upon is demand expectations in their attempt to gauge supply with consumption levels during a period of uncertainty as the global economy continues to shrink. Contracting economies use less energy, and the EIA says it expects the economic activity to be low throughout the year, with world gross domestic product seen down 0.8 percent followed by a 2.6 percent growth rate in 2010.

U.S. real gross domestic product is expected to decline by 2.8 percent this year, “leading to a reduction in domestic energy consumption for all major fuels.”

The International Energy Agency on Friday revised down by 570,000 bpd its global oil demand forecast for 2009 from last month, now saying in its Oil Market Report for March that world oil consumption for the year would be 84.4 million bpd, or down 1.2 million bpd from year-ago levels.

The downward revision is due to current economic conditions, citing the recent downward revision of the International Monetary Fund’s forecast for world growth rate for the year. Early this month, the IMF lowered its estimates for 2009 global gross domestic product to 0.5 percent amid deepening recession in the U.S., Europe and Japan, which has had a ripple effect throughout the globe.

The IEA said oil demand will fall mostly in those developed nations, especially the U.S., greatly affected by the economic downturn. But the Paris-based agency, which advises developed nations on energy matters, left unchanged its demand estimate for 2008 at 85.7 million bpd, down 400,000 bpd from 2007.