OPEC Cuts 2009 Oil Demand Forecast for a Third Month

By Alexander Kwiatkowski

Nov. 17 (Bloomberg) -- The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world's oil, slashed its 2009 demand forecast for a third month as the looming global recession threatens fuel consumption.

The 13-member group reduced its forecast for average oil consumption next year by 530,000 barrels a day, or 0.6 percent, to 86.68 million barrels a day, it said in its monthly oil market report. Falling transport fuel use and a slump in demand from the petrochemical industry are cutting oil consumption.

``The downbeat economic forecast has darkened the outlook for oil demand substantially,'' OPEC's Vienna-based secretariat said today. ``Some institutions are even forecasting a contraction in oil demand in the coming year.''

OPEC has called a ministerial meeting in Cairo for Nov. 29 after the 1.5 million barrel-a-day production cut announced last month failed to stem a slump in prices. Crude touched $54.67 a barrel, a 21-month low, on Nov. 13 and has fallen more than 12 percent since OPEC's last meeting in Vienna.

The group forecasts 2009 global oil demand to rise by 0.6 percent. Last month it predicted growth of 0.9 percent. OPEC expects demand to rise 0.3 percent this year.

The International Energy Agency last week reduced its 2009 estimate by 0.8 percent to 86.5 million barrels a day, the biggest cut to an annual demand forecast since 1996. The revision came after the International Monetary Fund warned of the first simultaneous recession in the U.S., Japan and Europe in more than 60 years.

OPEC's Cairo summit, originally intended for only the group's Arab members, was upgraded to a full OPEC meeting on Nov. 13. The producer group is also scheduled to meet on Dec. 17 in Oran, Algeria.

Assess Situation

OPEC will ``assess the market situation and collect information from member countries,'' the group's president, Chakib Khelil, who is also Algeria's energy minister, told reporters yesterday in Algiers.

``More frequent intervention'' in the market is required under the current circumstances and OPEC ``stands ready to take the necessary decisions to support oil market stability,'' according to the monthly report.

Oil consumption in developing countries will still increase 2.5 percent to 25.70 million barrels a day next year, OPEC said.

Lowered Forecast

The group lowered the demand forecast for its own crude in 2009 by 220,000 barrels a day, or 0.7 percent, to 30.92 million barrels a day. In 2008, demand for OPEC crude is predicted to be 31.84 million barrels a day, 170,000 barrels lower than it forecast last month.

OPEC cut its forecast for oil supply from outside the group by 310,000 barrels a day to 50.39 million barrels a day as oil companies scale back investment in production. Last month it forecast 2009 non-OPEC supply at 50.70 million barrels a day.

``The current financial situation has pressured companies to cut their planned capital expenditure, which has sharply influenced the supply forecast,'' the group said. ``All regions contributed to the downward revision,'' according to OPEC, with the biggest contribution from former Soviet countries.

Total OPEC crude production averaged 32.041 million barrels a day in October, a decline of 132,200 barrels a day from September, the report said, citing secondary-source estimates that include analysts and news agencies.

Saudi output fell by 153,500 barrels a day in October to 9.216 million barrels a day, according to the report. Angola's production rose.

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: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net