OPEC Cuts 2009 Oil Demand Forecast as World Economy Contracts

By Ayesha Daya

April 15 (Bloomberg) -- The Organization of Petroleum Exporting Countries cut its forecast for oil demand this year for an eighth successive month as the economic slowdown in the world’s biggest oil consumers worsens.

The estimate for 2009 global demand was lowered by 430,000 barrels a day to 84.18 million barrels a day, the producer group said. Demand will contract by 1.37 million barrels a day this year, or 1.6 percent. That’s slightly more than North Africa’s biggest oil supplier Algeria produces. OPEC forecast a decline of 1.2 percent last month.

“The world economic recession continues to erode oil demand growth, particularly in the U.S., Japan and China,” the group’s secretariat said in its monthly oil market report today. Demand in industrialized countries will fall this year and developing economies are “likely to see only minor growth.”

Oil has fallen almost $100 a barrel from a record high of $147.27 a barrel in July as the global crisis dampens demand for the fuel. OPEC’s net oil-export revenue will fall an estimated 51 percent to $476 billion this year, the U.S. Energy Information Administration said yesterday.

OPEC will meet in Vienna on May 28 to review production quotas. It agreed in March to keep supply unchanged as members continue to implement record reductions agreed last year, totaling 4.2 million barrels a day, to stem plunging prices.

Crude oil for May delivery rose as much as $1.09, or 2.2 percent, to $50.50 a barrel on the New York Mercantile Exchange, trading for $50.32 at 10:23 a.m. London time.

Benchmark Price

The benchmark crude price used by OPEC, derived from the cost of oil produced by each of its 12 members, averaged $45.78 in March, $4.37 or 11 percent higher than February, and was at $51.07 yesterday, OPEC said in its report today.

“Prices continued to strengthen in early April as economic sentiment showed some improvement following efforts by the G-20 to boost global growth,” the group said. “However, more recently, bearish reports showed a further slowdown in demand and higher stock levels have had a negative impact on prices.”

Three-quarters of the downward revision to oil demand came from developed economies, which will see demand fall to 46 million barrels a day. Consumption in those countries will decline 1.5 million barrels a day in 2009, OPEC forecasts, a drop of 3.2 percent compared with 2008.

Demand for OPEC’s crude in 2009 will contract by 2.07 million barrels a day to 28.74 million barrels a day, the group said, calculating that figure using its world demand and non- OPEC supply forecasts. That’s about 330,000 barrels a day less than it predicted last month.

IEA Forecast

The International Energy Agency cut its 2009 oil demand forecast last week for an eighth month, reducing its forecast by 1 million barrels a day to 83.4 million barrels a day. The IEA also revised its oil supply forecast from non-OPEC countries, saying it will fall by 320,000 barrels a day. Last month it expected non-OPEC output to be unchanged year-on-year.

OPEC cut its forecast for oil supply from outside the group to 50.61 million barrels a day due to lower expectations for China, Mexico, Kazakhstan, Azerbaijan and Vietnam. That still leaves an increase of 290,000 barrels a day, or 0.6 percent, this year over 2008. The IEA said it expects non-OPEC supply to fall to 50.3 million barrels a day in 2009.

Indonesia left the producer group this year. OPEC’s 12 remaining members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net