Opec cuts 2008 oil demand forecast to 86.88m barrels

Vienna/Nicosia: The Organisation of Petro-leum Exporting Countries (Opec) cut its 2008 global oil demand forecast for a fifth month as record fuel prices curb consumption and said the world has enough crude.

Oil demand this year will rise 1.1 million barrels a day to 86.88 million barrels, Opec said in its monthly oil market report yesterday.

The forecast is about 60,000 barrels a day lower than last month's estimate of 86.95 million barrels a day. Saudi Arabia has said it will produce an extra 300,000 barrels a day in June to curb prices that reached a record $139.12 a week ago.

Slowing demand and higher Saudi Arabian production will cause a higher-than-average global stockpile increase in the third quarter, said Opec, whose members supply more than 40 per cent of the world's oil. The trend will continue in the last three months of the year, when inventories typically decline, the report said.

"This clearly demonstrates that the market is amply supplied and that claims that the recent surge in prices is due to a supply shortage are unjustified," the report said. "Economic developments combined with current oil price levels are beginning to have an effect on oil demand."

Economic survey

Saudi Arabia, the world's top exporter, will host a June 22 meeting in Jeddah between oil producers and consumers and hedge funds to discuss prices.

The country is likely to propose a "sizeable" increase in oil production at a June 22 meeting with consumers to lower prices, the Middle East Economic Survey (Mees) said.

Current oil prices threaten the global economy and hurt the long-term interests of oil producers, Ebrahim Al Muhanna, an adviser to Saudi Arabian Oil Minister Ali Al Naimi, was cited as saying by the weekly news-letter based in Cyprus.

"When you see the increase in price and these gyrations - $11 a barrel in one day - this is unacceptable to us," Al Muhanna said, according to Mees. "This could hurt the global economy and even possibly the long-term interest in oil."

Al Muhanna wouldn't comment on the possible actions to be taken by the kingdom, said Mees, which didn't cite anyone as the source of information for a likely production increase from Saudi Arabia

Opec's estimate of global demand is close to the International Energy Agency's (IEA), the adviser of 27 oil-importing nations. The Paris-based IEA last week cut its forecast for a fifth month by 70,000 barrels a day to 86.77 million barrels a day, saying record oil prices are denting consumption.

Opec's report cut its estimate of 2008 oil supply from outside the 13-member group by 50,000 barrels to 50.13 million barrels a day on lower production in the UK, Australia, Sudan and Kazakhstan. Total output from non-Opec producers will increase by 700,000 barrels a day this year, the report said.

Total Opec production averaged 32.2 million barrels a day in May, an increase of 343,200 barrels a day from April on higher production from Saudi Arabia and Iraq, the report said, citing an average of estimates from analysts and news agencies. Saudi output increased by 150,000 barrels a day in May and Iraq's by 94,000 barrels a day, the report said.

The Opec members are Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

Indonesia last month said it will pull out of the group as declining production forces it to boost oil imports.