OPEC Cuts 2009 Oil Demand Forecast for a Second Month

By Grant Smith

Oct. 15 (Bloomberg) -- The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world's oil, lowered its 2009 demand forecast for a second month as the worst financial crisis since the 1930s threatens to send the global economy into a recession.

OPEC will hold an extraordinary meeting on Nov. 18 in Vienna, after its decision to trim excess supplies at last month's gathering failed to check a slump in prices, which have tumbled 49 percent from their July record. The group told members on Sept. 10 to strictly comply with production quotas, implying a cut of about 500,000 barrels a day.

``Dramatically worsening conditions in financial markets indicate strong fallout on the real economy is now inevitable,'' OPEC said today in its monthly oil market report. ``Ongoing financial market turmoil is expected to continue to impact oil demand well into the coming year.''

The 13-member group reduced its forecast for average oil consumption next year by 450,000 barrels a day, or 0.5 percent, to 87.21 million barrels a day, according to the report. OPEC, based in Vienna, also cut its forecast for demand this year by 330,000 barrels a day.

Last week, the International Energy Agency, an adviser to 28 nations, lowered its projection for global oil demand next year by 0.5 percent to 87.2 million barrels a day.

Next year, the world's most advanced economies will grow at the slowest pace since 1982, the International Monetary Fund said in its latest World Economic Outlook on Oct. 8.


Developing Nations

Oil consumption in developing countries will still increase 2.6 percent to 25.72 million barrels a day next year, OPEC said.

The group lowered the demand forecast for its own crude in 2009 by 190,000 barrels a day, or 0.6 percent, to 31.14 million barrels a day. That means consumption of OPEC's oil would shrink by 870,000 barrels a day next year.

In 2008, demand for OPEC crude is predicted to be 32.01 million barrels a day, 10,000 barrels lower than last month.

OPEC also lowered its expectation for supplies from outside the group this year and next, following storm damage in the Gulf of Mexico and pipeline disruptions in Azerbaijan.

The group acknowledged that next month's summit, announced last week, is in response to ``recent financial turmoil'' that may ``considerably reduce demand for crude oil.''

Output Cut

OPEC president Chakib Khelil said on Oct. 9 that a production cut is ``very likely.'' Iranian Oil Minister Gholamhossein Nozari today agreed that a reduction is the most likely outcome of the Nov. 18 summit. Saudi Arabia, the world's largest oil exporter, hasn't said whether it would support a cut.

OPEC forecast supply from outside the 13-member group to rise by 970,000 barrels a day, or 2 percent, in 2009 to 50.7 million barrels a day. Last month it forecast 2009 non-OPEC supply at 50.81 million barrels a day.

The group shaved its 2008 projection for non-OPEC production by 200,000 barrels a day to 49.74 million barrels a day. Industrialized countries' own output will decline by 270,000 barrels a day.

Total OPEC crude production averaged 32.157 million barrels a day in September, a drop of 308,600 barrels a day from August, the report said, citing secondary-source estimates that include analysts and news agencies.

Saudi output fell by 113,600 barrels a day in September to 9.377 million barrels a day, according to the report.

OPEC's 13 members are Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Indonesia will leave the group on Jan. 1.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net.