OPEC lowers oil demand forecast for 2011, 2012

OPEC lowers oil demand forecast for 2011, 2012

Vienna: Opec lowered on Monday its world oil demand forecast for 2011 and 2012, citing the poor economic climate, while welcoming Libya’s predicted return to production.

Oil demand for this year was set at 87.99 million barrels per day (bdp), up 1.06 million (bpd) from last year but lower than the previous forecast, the Organisation of Petroleum Exporting Countries said in its latest monthly report.

In August, Opec had estimated the 2011 world oil demand at 88.14 million bpd.

The 12-member cartel blamed the revision on a weaker-than-expected driving season in the United States and ongoing effects of the financial crisis, especially in the OECD group of rich nations, which in turn were dragging down demand in China and India.

“In our early oil demand forecast, we warned of a downward risk due to a further weakening in the global economy," Opec said in its report.

“The projected downside risks are already materialising, dragging world oil demand growth down."

For 2012, demand was expected to average 89.26 million bdp, down from the August estimate of 89.44 million bpd but still up 1.27 million bpd from 2010, the cartel said.

It cited “considerable uncertainty in total world economy in 2012" and warned that a poor US economic performance could lower demand even further.

However, the cartel also greeted news that OPEC-member Libya could resume production after it was interrupted earlier this year due to unrest.

“First-hand reports show that most oil production and export facilities — including pipelines and terminals — have suffered little or no damage and will be able to return to normal operations soon," the report said.

“Other facilities that have suffered greater damage will be rebuilt before long."

“Thus, the restoration of Libyan oil production to full capacity in less than a year-and-a-half appears to be realistic."

“Oil field production in the far east and west of the country is expected to resume in the coming days, reaching 1 million bpd within the next six months," Opec predicted.

A key African oil exporter, Libya produced about 1.6 million bpd before the rebellion broke out in mid-February against leader Moamer Kadhafi. This then slowed to a trickle during the unrest.

On Monday, crude prices sank in Asia as eurozone debt fears were compounded by disunity within the European Central Bank.

New York’s main contract, light sweet crude for delivery in October, dived $1.71 to $85.53 per barrel in the afternoon.

Brent North Sea crude for October delivery fell $1.17 to $111.60.