OPEC Cuts Need for Its Oil in '08 On Supply Growth

LONDON, March 14, 2008 (Dow Jones Newswires)

The Organization of Petroleum Exporting Countries Friday said it believed the world would need less oil from its 13-member group this year than in 2007 because growth in global oil supplies was set to outpace demand growth, particularly given signs that the U.S. was on "the brink of recession."

In its monthly oil market report, OPEC, which supplies more than 40% of the world's oil needs, said oil demand growth was unlikely to exceed expanding capacity from non-OPEC oil producers and increasing OPEC supplies in the form of nontraditional sources like natural gas liquids and non-conventional oil.

"Recent indicators reinforce the view that the U.S. economy may be on the brink of recession," the report said.

Such a downturn in the world's largest oil consumer meant that "oil demand growth is not likely to be higher than projected, resulting in lower demand for OPEC crude," it said.

OPEC said its estimate for how much crude would be needed from its 13 members in order to balance the market in 2008 was 200,000 barrels a day less than in 2007. It now forecasts demand for OPEC crude this year to average 31.7 million barrels a day versus 31.9 million barrels a day last year.

However, that was an upward revision of 150,000 barrels a day from its February estimate - a revision that the report did not explain.

The report said it expected non-OPEC supply to average 50.37 million barrels a day this year, up by 910,000 barrels a day from 2007. But it also added that non-OPEC supply was expected to grow a little less that it previously expected due to downward revisions in Canada, Mexico, Norway, the U.K., Brazil, Chad and Russia. Last month's report had forecast average non-OPEC supply to hit 50.53 million barrels a day.

It maintained its forecast for OPEC supplies of natural gas liquids and non-conventional oil in 2008 to average 4.93 million barrels a day.

OPEC noted that "recent surveys indicate that (economic) sentiment appears to be worsening, even outside the U.S.," lowering its projection for first-quarter oil consumption in major industrialized nations to 49.96 million barrels a day from last month's estimate of 50.11 million barrels a day.

In spite of that, it maintained its forecast for 2008 world economic growth at 4.6%.

It also maintained its forecast for 2008 oil demand growth worldwide at 1.2 million barrels a day, representing a rise of 1.4% from 2007, saying that stronger-than-expected oil demand in developing countries would to some degree offset weaker consumption in industrialized nations.

It lowered its projection for total crude consumption this year by 200,000 barrels a day to 86.97 million barrels a day, but noted that "the slowdown in the world economy, along with high retail petroleum prices, is considered a major variable in oil demand this year."

The report said current production from the group, whose output meets about four out of every 10 barrels consumed globally every day, stood at 32.09 million barrels a day.

LONDON, March 14, 2008 (Dow Jones Newswires)