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World

DEMAND FOR OIL LESS THAN EXPECTED
By Javier Blas

Financial Times (London)
January 17, 2008

http://www.ft.com/cms/s/0/29768918-c49e-11dc-a474-0000779fd2ac.html

World demand for crude oil in 2008 will grow less than previously expected as the U.S. economic slowdown reduces the pressure on the Organization of the Petroleum Exporting Countries to raise its output in response to high oil prices.

The International Energy Agency, the Western countries' energy watchdog, yesterday lowered its forecast for growth in oil demand to 2m barrels a day, 130,000 b/d less than estimated in December, although far above last year's rise of 1m b/d.

The IEA said the forecast could be further revised if forthcoming economic assessments point to a weaker-than-expected outlook for the U.S. economy. OPEC has already expressed its concern that a U.S. recession could damp oil demand.

Crude oil consumption fell by 100,000 b/d last year in Organization for Economic Co-operation and Development countries after declining by 135,000 b/d in 2006.

But those reductions were more than offset by soaring demand in emerging countries.

OPEC, which controls about 40 per cent of the world's oil output, will meet in Vienna on February 1 to revise its production policy. So far there is no indication it is likely to raise its output.

Gholamhossein Nozari, Iran's oil minister, yesterday said there was enough oil in the global market and prices had fallen back after hitting a record high of $100.09 a barrel in early January.

Crude oil prices dropped yesterday to the lowest level in three week[s] on concerns about U.S. economic growth. In New York, West Texas Intermediate crude oil fell $2.03 to $89.87 a barrel.

"There is no need to increase . . . production," Mr. Nozari said. OPEC delegates have expressed similar views, raising concerns about the faltering U.S. economy and its impact on oil consumption during the spring, when oil demand usually falls, and downplaying low inventories in Europe, Japan, and the U.S.

The IEA, however, said it was worried about the low level of the inventory for crude oil and products in industrialized countries, warning that it had fallen to 51.1 days of demand, the lowest level since autumn 2004.

"Tension in Nigeria and the Middle East and fund positioning remain important supportive factors" for prices, the watchdog said.

OPEC left its official production ceiling unchanged at its meeting in December in Abu Dhabi.

But the IEA said the 10 members of the cartel subject to quotas increased real production to almost 27.5m b/d last month, up from 27.0m b/d in November.