Forecast on oil demand revised down by Opec

The 13-member group, source of two in every five barrels of oil, also said higher Opec production, easing political tension and a stronger US dollar indicated a weaker outlook for the oil market.

Noting the recent drop in oil prices, the cartel concluded “The continued softening of oil market fundamentals, which has been seen since the start of the year, have finally begun to be reflected in prices.” “The market’s mild reaction to the recent supply disruptions in the Caucasus is indicative of the recent change in sentiment,” it added. “Given these trends, risks to the outlook for the world oil market appear to be on the downside,” OPEC said.

Oil demand will rise by 1.0 million barrels per day (bpd) this year, 30,000 bpd less than the previous forecast, Opec said in its monthly oil market report for August.

“Due to a major slowdown in transport and industrial fuel consumption not only in North America but also in OECD Europe and Pacific, oil demand growth will be on the decline in 2009 which will make the world oil demand growth the lowest since 2002,” the oil cartel said in its report.

The group left its forecast for world consumption growth in 2009 unchanged, predicting a rise of 900,000 bpd. Opec left its estimate for supply growth from non-member countries steady at 950,000 bpd next year.

The cartel said that demand for its crude is expected to average 32.05 million bpd in 2008, lower than the group’s production in July of 32.64 million bpd.

With current OPEC production well above the expected demand for OPEC crude, there is potential for a sharp build in crude oil inventories,” it said.