Opec on Monday cut its forecast for demand for its oil in the fourth quarter of 2006 and said price weakness may persist, adding urgency to a meeting this week to thrash out details of a cut in output.
Demand for Opec crude, known as the call on Opec, in the fourth quarter will average 28.69 million barrels per day, the 11-nation producer group said in its October report. The previous forecast was 28.86 million bpd.
Oil prices have slid to below $60 a barrel from a July peak of $78.40, raising concern in Opec of a further drop because of slowing economic growth, rising supply from rival producers and brimming inventories.
"Uncertainties about global economic prospects particularly in the USA, slowing demand growth, rebounding non-Opec supply and high stock levels have triggered a strong bearish sentiment in the market," the report said. "This has led to some concern that the downward momentum might persist, causing prices to overshoot and fall below levels justified by fundamentals."
The Organisation of Petroleum Exporting Countries is set to meet on Thursday in Qatar to work out details of a 1-million-bpd cut in output, the group's first plan to reduce supply in two years.
Opec President Edmund Daukoru, who is also Nigeria's top oil official, told Reuters on Sunday that the group must act now to stem a "catastrophic" slide in prices. Crude oil in New York was up 12 cents at $58.69 a barrel at 1500 GMT. It fell to $57.22, the lowest this year, on Thursday.
An analyst said Opec may also cut supply at its next meeting, scheduled for December 14 in Abuja, Nigeria, because the present reduction may just stabilise prices for now. "A 1 million bpd cut in Opec output would put a temporary floor under prices," said Adam Sieminski, chief energy economist at Deutsche Bank in New York.
"I think they are going to talk about even more cuts in December as they fine-tune their supply and demand estimates for 2007. Opec oil ministers have been debating whether to cut supply from actual production or from the group's notional output limit of 28 million bpd. The 10 members bound by quotas, all except Iraq, pumped 27.6 million bpd in September, Opec said, citing secondary sources. That was down from 27.7 million bpd in August.
A cut from quotas would spare members such as Venezuela, Iran and Indonesia from lowering actual supply because they are struggling to pump their full entitlement under the current output limits. Opec left its outlook for growth in global oil demand next year unchanged at 1.3 million bpd. It cut the 2006 forecast by 100,000 bpd to 1 million bpd due to a slowing world economy.
The International Energy Agency, an adviser to 26 industrialised nations, last week trimmed its 2007 oil demand growth forecast to 1.45 million bpd. A jump in non-Opec supply next year is set to lower the need for Opec oil. Opec expects supply from rivals to rise by 1.8 million bpd to average 53 million bpd, a rebound it has called the fastest in two decades. As a result, Opec expects demand for its crude next year to fall to 28.08 million bpd from 28.72 million bpd this year.
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