OPEC Raises Expectations for World Oil Demand Growth

DUBAI (Zawya Dow Jones), Oct. 13, 2009

The Organization of Petroleum Exporting Countries said Tuesday it revised up its forecast for world oil demand in 2009 and 2010 as the global economy continues to show signs of recovery but warned that sustained government spending to support growth was difficult to maintain, in particular in advanced economies.

"With the U.S. oil demand bouncing back from a steep historical decline, the forecast for 2009 world oil demand growth has been revised up by 200,000 barrels a day to now show a contraction of 1.4 million barrels a day," OPEC said in its widely-watched monthly market report.

World oil demand in 2009 is now seen averaging 84.2 million barrels a day on the back of rising demand from North America, the Organization for Economic Cooperation and Development, or OECD, Pacific region, India and the Middle East.

OPEC also revised up global oil demand growth in 2010 by 200,000 barrels a day. Next year's demand growth is now expected to reach 700,000 barrels a day to average a daily 84.9 million barrels amid a "slow and weak" improvement in the world economy as financial markets stabilize.

"The second quarter is now seen to mark the bottom of the recession, a view that has been reflected in comments by world leaders and policy-makers at the G20 summit in Pittsburgh, as well as at the annual meeting of the IMF/World Bank in Istanbul," OPEC said in the report.

However, OPEC warned that the pace and strength of the recovery is still not clear as improvements so far were driven by higher government spending, which will be difficult to sustain.

"The current level of fiscal stimulus will be difficult to sustain as government spending is creating large deficits, particularly in the advanced economies," OPEC said. Growth is not expected to pick up sufficiently in developed countries without further stimulus, it added.


According to the report, OPEC's overall production rose slightly by 40,000 barrels a day to 28.9 million barrels a day in September.

The data follows last month's decision by OPEC to maintain crude production targets unchanged for the group's 11 quota-bound members, which excludes Iraq, and indicate that the cartel further loosened its grip on production in September, with compliance dropping to about 63%.

"Members' compliance has further deteriorated most likely as they try to gain extra revenues from the attractive current prices. It seems they are waiting for demand to pick up to balance the oversupply which is a dangerous game if there is a contraction and government stimulus packages are not sustained," said Damien Cox, energy analyst at Energy Quote.

OPEC, which produces about 40% of the world's oil, said it estimates demand for its crude this year to average 28.6 million barrels a day, around 100,000 barrels a day higher from the previous report. This still represents a considerable decline of 2.3 million barrels a day compared to 2008.

In 2010, demand for OPEC crude is expected to average 28.4 million barrels a day, an upward revision of 300,000 barrels a day from the previous assessment but still a decline of 200,000 barrels a day on 2008.

The front-month November light, sweet, crude contract on the New York Mercantile Exchange was trading $1.03 higher at $74.30 a barrel at 1230 GMT Tuesday.

OPEC said in its report that the bulk of next year's demand growth will take place mainly in non-OECD states, notably China, the Middle East, India and Latin America, driven largely by the industrial, transport and petrochemical sectors.

Non-OPEC oil supply is forecast to average 50.86 million barrels a day in 2009 after an upward revision of 50,000 barrels. This represents an increase of 410,000 barrels a day over the previous year, helped by improved output in the U.S., Russia and Caspian region.

"In 2010, non-OPEC oil supply is expected to grow 350,000 barrels a day, supported by anticipated growth in Brazil, Azerbaijan, Canada and Kazakhstan," the report said.  

Copyright (c) 2009 Dow Jones & Company, Inc.


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