Opec slashes estimated demand growth for 2008 amid US lag

The Organisation of Petroleum Exporting Countries (Opec), whose members produce more than 40 per cent of the world's oil, cut its estimate of demand growth for crude this year on the threat of a US recession.

Opec lowered its estimate of first-quarter demand this year by 130,000 barrels per day (bpd) to 87.19 million bpd.

The overall 2008 estimate was cut 80,000 bpd to 86.99 million barrels, the Vienna-based organisation said in a report. That cuts projected gains in demand this year to 1.4 per cent from 1.5 percent in last month's report.

"Risks to the world economy have increased considerably in January on mounting evidence of a slowdown in the US economy, fueling fears of an outright recession,'' the report said.

The cuts follow a report by the International Energy Agency on February 13 that lowered its estimate for 2008 by 200,000 barrels a day to 87.6 million barrels as a credit crisis spreads through the US economy, threatening recession in the world's largest energy user.

Opec holds its next meeting in Vienna on March 5 and may cut production because of the slowdown, Opec President Chakib Khelil said on February 13.

Demand for crude may drop by 1.8 million barrels a day in the second quarter due to a US slowdown and the end of the heating season in many developed economies, the Opec president said this week.

US gasoline demand fell 3.1 per cent for the week ended February 1 compared with the same week last year to average 8.86 million barrels, MasterCard said in a weekly report.

"Although Opec's demand growth projections are lower than other assessments, one cannot rule out further downward revisions in the months ahead," the report said.

Growth in developing economies would continue to be strong this year with expectations of economic growth in China and India unchanged from last month's report, Opec said.

Estimates by IEA of 2008 demand growth in Latin America, the Middle East and parts of Asia, excluding China, outpaced Opec estimates by about 200,000 barrels, 300,000 barrels and 300,000 barrels a day respectively.

Concerns over depleted stockpiles of oil products and crude during the northern hemisphere's winter helped push the price of crude past $100 in New York for the first time in January.

Crude oil for March delivery rose as much as $1.21, or 1.3 per cent, to $96.67 a barrel on the New York Mercantile Exchange today. The contract traded at $96.45 at 3:19 pm London time. Prices have increased by 66 per cent in the past 12 months.

Opec held its production ceiling unchanged at its last meeting on February 1, leaving it at 29.673 million barrels a day for 12 of its members.

"It probably would be difficult in this price environment to cut production,'' said Simon Wardell, a London-based energy analyst with Global Insight. ``I think Opec would like to cut and may if prices fall well below $90.''

Total Opec production averaged 32 million barrels a day in January, almost unchanged from December, according to the report, which cited an average of secondary sources, or estimates from analysts and news agencies.

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OIL SLIP

US gasoline demand falls 3.1% for week ended Feb 1

Demand for crude may drop by 1.8 mn barrels a day in Q2

Growth in Latin America, and parts of Asia, excluding China, outpace Opec estimates by about 200,000 and 300,000 barrels respectively