NEW YORK (WALL STREET JOURNAL via Dow Jones Newswires), November 14, 2008
OPEC members will meet later this month in a bid to halt the tumble in crude prices, amid signs that a global economic slowdown is punishing near-term demand for oil.
The news of the meeting, which analysts expect will result in another production cut, came as oil prices hit a 22-month low amid fresh evidence that the world's industrialized economies are in recession and consumers and industries are cutting back on fuel spending.
The Paris-based International Energy Agency on Thursday slashed its forecasts for global oil demand, saying it will grow by just 0.1% this year. That is down from last month's projection of 0.5% growth and far below the 1.1% growth rate of 2007. Many analysts think global oil demand will actually contract this year, for the first time since 1983.
On Thursday on the New York Mercantile Exchange, U.S. benchmark crude closed up $2.08, or 3.7%, at $58.24 a barrel on market expectations that OPEC will cut output again.
With gloom hanging over demand, Organization of Petroleum Exporting Countries members will meet Nov. 29 in Cairo, just a month after a hastily arranged gathering in October, according to people familiar with the matter.
The cartel's secretariat in Vienna didn't confirm the meeting, but OPEC delegates said the group's 12 members will meet at an already scheduled gathering of Arab oil-producing nations.
Analysts expect the meeting to result in another substantial reduction in the group's production. OPEC agreed to cut output by a total of two million barrels a day at its last two meetings in September and October, but those moves have so far failed to stop the slide in crude prices. Global demand for oil is about 86 million barrels a day; OPEC supplies roughly 40% of that total.
OPEC price hawks Iran and Venezuela have argued in recent days for a further one-million-barrel-a-day reduction to supply, though it is unclear what sort of appetite OPEC kingpin Saudi Arabia would have for another big cut. The kingdom likely will want assurances that other OPEC members are complying with the cuts they have already agreed to before shouldering more output reductions.
The IEA, an energy watchdog that advises 28 industrialized countries, said Thursday that consumers and businesses globally are expected to use on average 86.2 million barrels a day this year -- a downward revision of 330,000 barrels from the agency's October report.
The IEA also slashed its 2009 world crude demand forecast by 670,000 barrels a day and said consumption next year is expected to grow by a mere 0.4% to 86.5 million barrels a day.
The changes in the IEA's forecasts underscore the extent to which a slowing global economy is hurting crude consumption.
"We are looking at an outright recessionary environment in the U.S. and other major economies so this new forecast reflects that," said IEA analyst David Martin.
That dark outlook was confirmed Thursday by Germany, Europe's biggest economy, which said it entered recession after economic activity fell in both the second and third quarters.
In a departure from past months, the IEA made its first substantial downward revision to forecast oil demand in China and other emerging markets, where much of the growth in energy consumption has come from in recent years. Expected demand in 2009 in these nations was cut by 260,000 barrels a day to 39.5 million barrels a day, with most of that decline coming in China.
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