OPEC cuts 2008 oil demand growth on weak economy
By Alex Lawler and Barbara Lewis, Reuters, September 16 2008
LONDON, Sept 16 (Reuters) – OPEC cut its forecast for oil demand growth this year and said on Tuesday it would monitor consumption closely as financial turmoil weakens the world economy.
Oil demand will rise by 880,000 barrels per day (bpd) this year, 120,000 bpd less than the previous forecast, OPEC said a monthly report. OPEC has now cut its 2008 demand growth forecast six times this year.
« The weakening economic situation has been reflected in a slowdown in world oil demand growth, » the oil exporters’ group said in the report.
« The economic slowdown is now spreading beyond the U.S. to Europe and Japan, with contagion risks to other regions. »
OPEC’s report is its first collective word since it met in Vienna last week and said it would adhere strictly to production targets, effectively removing around half a million bpd from world markets.
Oil has fallen this week to a seven-month low after news Lehman Brothers Holdings Inc. had filed for bankruptcy protection. U.S. crude extended losses after OPEC’s report to just above $90 a barrel.
World oil demand is now expected to average 86.6 million bpd in 2008, the Organization of the Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil, said.
The group cited a strong decline in North American demand in lowering this year’s growth forecast, and analysts said the weakening outlook and falling oil price increase the chance OPEC would trim supply.
« This report, plus the price action since the OPEC meeting, increases our confidence that OPEC will follow through on what they agreed last week, » said Mike Wittner of Societe Generale.
« If U.S. demand continues to weaken, it increases the odds of possibly another cut in December. »
OPEC next meets to revise its output policy on Dec. 17 in Oran, Algeria.
Oil output in line with last week’s OPEC decision would be more than enough to meet demand ahead of winter and contribute to an above-average rise in inventories, the report said.
Since a record high of $147.27 a barrel hit in July, OPEC said, the oil market had shifted from a « misguided perception » that supplies were tight to a focus on weakening fundamentals and worsening economic prospects.
A strengthening U.S. dollar has also helped to lower prices of dollar-denominated oil, it said, but the outlook for the U.S. currency could be undermined by the latest shocks to the financial system.
OPEC left its forecast for world oil consumption growth in 2009 little changed, predicting a rise of 870,000 bpd to 87.7 million bpd.
The world economy next year is expected to grow at 3.7 percent, 0.1 percent lower than previously thought, as the U.S. slowdown has spread to other regions, potentially reducing demand for oil, OPEC noted.
« The forecast may be subject to downside revision due to mounting financial risks to growth as witnessed by the bankruptcy filing by Lehman Brothers, » it said.
OPEC also forecast supply from non-member countries would be less than expected this year and next.
It trimmed expected supply from non-OPEC countries in 2008 by about 70,000 bpd to 49.94 million bpd, partly due to the impact on U.S. supply of Hurricanes Ike and Gustav.
OPEC lowered the 2009 forecast by about 140,000 bpd to 50.81 million bpd, citing Russian supply.
As a result, OPEC said demand for its crude was expected to average 32.0 million bpd in 2008, just 50,000 bpd less than the previous forecast, but lower than the group’s production in August of 32.5 million bpd.
(Editing by Anthony Barker)