Weak economy drops oil demand projections

NEW YORK (CNNMoney) -- The International Energy Agency lowered its estimates for oil demand on Wednesday amid continued concerns about the fragility of the global economy and slow growth.

In its monthly oil market report, the IEA said global oil demand "has grown at a moderate, but stable pace, in recent months, suggesting neither resurgent economic activity nor a downward consumption spiral."

"This picture could deteriorate, however, with a downward lurch in economic prospects," the Paris-based group added.

The IEA cut its demand projections for this year by 50,000 barrels per day and by 210,000 barrels per day for 2012. The agency now believes demand will rise a modest 1.3 million barrels per day in 2012 to 90.5 million, after sitting at 89.2 million in 2011.

"We haven't seen the strong demand that we saw in 2007 for a couple of years now, and there's no reason to think that we will until employment picks up again," said Peter Beutel, an oil analyst at Cameron Hanover. "Demand has been pretty dull lately, pretty anemic, so I'm not surprised that they've revised it lower."

Gas spending and prices by state

Oil traded around $85.50 a barrel on Wednesday. That's a far cry from the $110+ level it hit earlier this year as civil war escalated in Libya and Japan reeled from its tsunami disaster.

Prices are down roughly 6% from the start of this year.

U.S. prices at the pump, meanwhile, will likely drop next year, according to a report released Wednesday by the U.S. Energy Information Administration.

The group said average regular grade US gasoline prices would stand at $3.52 this year before dropping to $3.43 in 2012. Diesel prices are projected to drop from $3.80 this year to $3.73 next year.

The national average price for a gallon of regular gasoline rose nine tenths of a cent to $3.405 Wednesday, according to a daily survey by motorist group AAA.