Opec sees oil demand falling, pressure on prices

World oil demand is contracting faster than expected, increasing pressure on prices, Opec said on Friday ahead of a key meeting of the group this weekend. The Organisation of the Petroleum Exporting Countries said in its Monthly Oil Market Report that demand would drop by 1.01 million barrels per day (bpd) in 2009 to average 84.61 million bpd.
Its previous forecast was for demand to fall 580,000 bpd. World oil demand is falling for the first time in a generation as the deep global downturn closes factories and brings unemployment to the worlds largest economies. Oil prices have fallen by around $100 a barrel from a peak of almost $150 last July, forcing Opec producers to cut oil output in an attempt to balance the market. Opec has promised to cut production by 4.2 million bpd, equal to about 5 percent of daily world demand, from its output levels in September.
The report said Opecs action so far had managed to help halt the steep downward slide in oil prices and keep them close to $40 a barrel. Opec, which pumps more than a third of the worlds oil, meets in Vienna on March 15 and must decide whether to cut production further.
The report said pressure on the oil market would continue. "With continued economic deterioration and demand erosion as well as the impending low demand season, there is likelihood of renewed pressure on prices," the report said. It said oil prices needed to stay at levels that "support energy investment across the supply chain to help sustain longer-term economic growth." The report said demand for Opecs oil would fall by 1.8 million bpd in 2009, a slightly steeper drop than its previous forecast of a year-on-year fall of 1.7 million bpd.
The report showed Opec still had more to do delivering on existing output curbs. In February, the 11 members with supply targets, all excluding Iraq, cut output by 649,000 bpd to 25.72 million bpd, according to data from secondary sources cited by Opec in the report. Production remains above Opecs 24.84 million bpd implied target and the cutback indicates Opec met just over 79 percent of its pledge to lower output, according to a Reuters calculation based on the Opec data.