The Organization of Petroleum Exporting Countries said Friday weakening world economic growth and demand prospects and ongoing increases in U.S. and European crude and gasoline inventories could soon force the producer group to pare back its own production to avert a drop in crude prices.
"These unfolding developments in the world economy and the oil market warrant close monitoring in the months ahead to ensure a timely response to changing conditions," OPEC said.
The group, in its February oil market report, said current production from all 13 OPEC nations currently stood at about 32 million barrels a day. This level should result in rising global oil inventories in coming quarters.
Such stock increases were already apparent in the U.S., where commercial oil and gasoline stocks are now back above the five-year average following a steady draw down in December, OPEC said.
The group, whose output meets about four out of every 10 barrels consumed globally every day, shaved its forecast for 2008 global oil demand growth by 100,000 barrels a day to 1.2 million barrels a day, representing a rise of 1.4% from 2007. Total crude consumption globally this year is expected at 87 million barrels a day. OPEC is scheduled to meet March 5 in Vienna to review its production policy. Analysts say the group will find it tough, politically, to reduce output, even amid weakening demand and rising oil inventories, if oil prices remain above a lofty, $90 a barrel level because of global economic uncertainty.
Crude traded Friday down around 40 cents at $95.15 a a barrel at 1200 GMT as dealers cashed in recent gains.
OPEC left production unchanged when it met earlier February, saying global oil supplies were healthy and high prices were related to geopolitical issues, not oil market conditions.
OPEC is decidedly less optimistic on oil demand than other forecasters, including the International Energy Agency. The Paris-based IEA revised down its 2008 global oil demand forecast Wednesday but still sees crude consumption rising this year by 1.9%, a half-percentage point above OPEC's forecast.
Added to its bearish outlook, OPEC said demand for its crude was expected to be even less in 2008 relative to its forecast in January following a revision to 2007 data.
The group said daily consumption of OPEC oil this year was now forecast to be 375,000 barrels less than in 2007, compared with an expectation for a drop of 307,000 barrels a day in its January report. Total demand for OPEC oil is expected to average 31.53 million barrels a day in 2008.
OPEC production minus Iraq, the only OPEC member that isn't part of the group's quota system, was 29.79 million in January, up 136,000 barrels a day from December. Including Iraq, OPEC output last month averaged 31.99 million, unchanged from December.
Saudi Arabia, OPEC's de facto leader due to holding most spare production capacity, pumped 9.08 million barrels a day in January, up 100,000 barrels a day from December and 140,000 barrels a day above the kingdom's output allocation under OPEC's quota system, according to OPEC data.Copyright (c) 2008 Dow Jones & Company, Inc.
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