Opec forecasts global drop in oil prices

LONDON, Tuesday

World demand for Organisation of the Petroleum Exporting Countries (Opec) oil will fall next year, the producer group has said.

The organisation cited increased supplies from non-member countries and the sluggish pace of global economic recovery.

Opec said in its monthly report demand for its crude would average 28.11 million barrels a day (bpd) next year, down 380,000 bpd from this year.

"Given the projected outlook, increasing spare capacity and growing idle refining capacity should be sufficient to offset any surge in demand or supply disruption in either crude or products," Opec said.

"This reduces the likelihood of fundamental factors exerting strong upward pressure on prices next year."

Despite the expected fall in demand for its own oil, Opec said total world oil use would rise next year to 84.34 million bpd, up 500,000 bpd from this year, driven mainly by growth in emerging economies.

Opec also trimmed its estimate for world oil consumption this year. It now expects demand to decline by 1.65 million bpd, 30,000 bpd more than its previous forecast.

Oil prices have had a volatile year. They fell from an all-time high of more than $147 (Sh11,400) a barrel in July last year to a low of $32.40 (Sh2,500) in December.

By the end of last month, they had recovered to a year-high of $73.38, (Sh5,700) but last week fell below $60 (Sh4,700).

Cut output

To try to support the market, Opec agreed last year to cut output by 4.2 million bpd, equal to about five per cent of daily world demand, from its output levels in September.

Yesterday’s report said Opec’s crude oil output, excluding Iraq, rose to 26.03 million bpd last month from 25.97 million in May, suggesting higher prices encouraged some members to relax output discipline.

The rise in Opec output reduced its compliance with target supply cuts to 72 per cent, versus 73 per cent in May, according to Reuters calculations based on the report.

Oil prices showed little reaction to the latest data. US crude was up $1.33 at $61.02. —Reuters