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Global energy producers are increasingly shifting their focus to Asian markets as the gap widens between sluggish demand growth in the rich world and the booming energy appetite in emerging markets.

In a report yesterday, the International Energy Agency said producers such as Saudi Arabia and Russia are shifting supplies from their traditional customers to China and other rapidly developing countries.

The changing global market reflects a stark division between the stagnating developed world and the rebounding emerging economies, said the Paris-based agency, which advises the 31 rich countries of the Organization for Economic Co-operation and Development.

Saudi Arabia, the world's largest oil producer, has been increasingly shifting deliveries of Saudi heavy and medium-grade crude to meet demand in its own power generation sector and higher sales in the Asian market, the agency said.

Russia, the world's second-largest oil supplier, recently opened the East Siberia-Pacific Ocean oil pipeline, which is diverting crude away from Baltic and Black Sea ports to supply China and other growing Asian markets.

"They're going where the customers are," Jim Williams, energy economist with WTRG Economics Inc., said yesterday.

"It's not a strategy to exclude us. It's a strategy to go where the market growth is. Because it will probably be years - and perhaps not ever - before the U.S. gets back to the level of crude oil demand that it had just a few years ago."

The combination of a stagnant American oil market and a booming Asian one poses a challenge to Canadian oil sands producers, who are planning to ramp up production through exports to the United States. With a series of pipeline expansions in the works, the Canadian industry expects to grab a growing share of a declining U.S. market as Mexican and Venezuelan production declines.

But the diverging markets will also provide greater impetus for Enbridge Inc.'s plan to build the export Gateway pipeline from Alberta to the West Coast to access Pacific Rim markets.

"I've never looked at the cost of the pipeline but that is certainly a reasonable approach," Mr. Williams said.

The U.S. petroleum market has recovered somewhat from the depths of the recession, though refineries continue to operate well below capacity and companies are closing older, less efficient plants, such as Royal Dutch Shell PLC's refinery in Montreal.

Global oil prices are being whipsawed by the wildly divergent fundamentals in the world market, with prices rising on news of strong demand from China, but then falling back again when traders focus on the weak U.S. economy.

After capping a start-of-year rally to $83 (U.S.) at the beginning of the week, crude prices fell steadily, closing yesterday at $78 (U.S.) a barrel on the New York Mercantile Exchange, down $4.75 on the week.

"You're seeing further signs that without buoyant economic optimism, the oil markets continue to slide lower because of the poor underlying fundamentals in the market," Gene McGillian, analyst at Tradition Energy in Stamford, Conn., told Reuters.

In its monthly oil report, the IEA left its forecast for global demand growth unchanged from its December estimate, but reduced its forecast for OECD demand and boosted its expectation for non-OECD oil consumption for 2010.

The agency expects the world's appetite for oil to grow by 1.7 per cent - or 1.4 million barrels per day - in 2010, after falling by roughly the same amount last year. Virtually all the growth will occur outside North America, Europe and Japan.

OECD crude demand fell by a staggering 4.4 per cent last year, and will remain flat this year, while non-OECD countries saw the crude demand climb by 2 per cent last year, and can expect growth of 3.7 per cent over 2010.