Crude Oil Demand to Rise as Refineries Restart, Calyon Says

By Nesa Subrahmaniyan

Sept. 11 (Bloomberg) -- Crude oil consumption will rise in the fourth quarter this year as refineries restart after maintenance and increase fuel production to meet winter demand, a Calyon analyst said.

New refineries starting in the fourth quarter will add to the demand for Middle East crude, Christophe Barret, a London- based analyst at Calyon, the investment banking unit of Credit Agricole SA, said in a report yesterday.

Reliance Petroleum Ltd., a unit of Reliance Industries Ltd., will start its 580,000 barrel-a-day refinery in Jamnagar, India, in the fourth quarter and will rely partly on Saudi Arabian crude supplies, Barret said.

Crude oil in New York has fallen about 30 percent from a record $147.27 a barrel on July 11 as high prices and slowing global economic growth reduced demand for fuels.

``The crude market balance looks tighter'' in the fourth quarter, Barret wrote. ``In addition in October, November, the United Arab Emirates production will significantly decline 170,000 barrels a day due to planned maintenances.''

The Organization of Petroleum Exporting Countries agreed at a meeting in Vienna yesterday to limit total production for 11 members to 28.8 million barrels a day, unchanged from their previous targets. The organization urged members to cut output to comply with quotas after prices fell to a five-month low.

``If strictly implemented, the agreement would, however, severely tighten the market in the fourth quarter of 2008,'' wrote Barret, who previously worked at Total SA, Europe's biggest oil refiner. ``OPEC may be happy to have prices at between $90 and $110 a barrel and look ready to defend these levels.''

To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.