OPEC Cuts 2006 Global Oil Demand Growth Forecast

By Reuters Posted 16 August 2006 @ 03:55 pm EET     Print     Reprint     E-Mail     Comments

LONDON (Reuters) - World oil demand will rise more slowly than previously expected in 2006, partly because of record high prices, the Organization of the Petroleum Exporting Countries said on Wednesday.

Demand will rise by 1.3 million barrels per day, 80,000 bpd less than expected in July, the 11-member producer group said in a monthly report. OPEC left estimated growth in 2007 unchanged at 1.3 million bpd.

OPEC's outlook comes as oil is trading near $73 a barrel, within sight of a record $78.40 hit in July. Oil demand in industrialised OECD countries fell in the second quarter and last week's alleged aircraft bomb plot may curb air travel, OPEC said.

"The planned attack on airliners in London is expected to dent jet fuel demand, at least in the short run," the report said. "High oil prices have somewhat dampened oil demand growth, especially in some Asian countries."

Oil is up 20 percent in New York this year due to attacks on Nigeria's oil industry, concern about the row over OPEC member Iran's nuclear programme and worries that the Lebanon conflict may spread in the Middle East.

The report from OPEC, source of more than a third of the world's oil, points to an easing of the strain on supply in the 84.5 million bpd world market, analysts said.

"The fundamentals are finally beginning to deteriorate from the point of view of prices," said Adam Sieminski, chief energy economist at Deutsche Bank."The high prices are beginning to encourage some downward shifts in demand."

Even so, world tension and a strain on oil refineries may keep prices high, despite a rise in OPEC oil output and production capacity over recent months, OPEC said.

"These positive developments in the upstream may not be sufficient to moderate crude price levels given the ongoing bottlenecks in the downstream and continuing geopolitical tensions," it said.

OPEC produced 29.51 million bpd of crude in July, down 230,000 bpd from June, the report said, citing estimates from secondary sources.

Except Saudi Arabia, OPEC members are pumping at full tilt. Top world exporter Saudi Arabia has cut output in recent months and held supply steady at 9.16 million bpd in July, OPEC said.

While dropping in July, OPEC's production is up from an average of 29 million bpd in 2004.

Easing pressure on the group, a rise in supply from rival producers will lower the need for OPEC oil next year. Demand for OPEC crude in 2007 will drop by 800,000 bpd to 28.3 million bpd, the report said.

Non-OPEC supply will increase by 1.8 million bpd next year to 53 million bpd due to new output from places such as the Caspian and Africa, OPEC said. The report puts this year's growth at 1.1 million bpd.

OPEC cut this year's estimate by about 200,000 bpd, reflecting the loss of output from the partial shutdown of Prudhoe Bay, BP's Alaskan oilfield.

The International Energy Agency, an adviser to 26 industrialised countries, expects slower supply growth from non-OPEC this year but a faster expansion in 2007.

The loss of Prudhoe Bay output forced the IEA in a report last week to cut its 2006 forecast for non-OPEC supply growth by 280,000 bpd to 860,000 bpd.

But the Paris-based IEA raised 2007 growth from the independent producers by 190,000 bpd to 1.89 million bpd.