Opec sees slower oil demand

World oil demand is likely to grow more slowly in 2012 because of a fragile global economy and deepening decline in consumption in Europe, the Organisation of the Petroleum Exporting Countries said in its first forecast for next year. Oil prices could draw some support from a lingering supply shortfall of more than 1 million bpd between the anticipated demand for Opec crude and the amount pumped by the 12-member group, although increased output from top producer Saudi Arabia has narrowed the gap.
In its monthly report on Tuesday, Opec predicted world oil consumption would rise by 1.32 million barrels per day (bpd) in 2012, slightly lower than the growth of 1.36 million bpd expected this year. Opec said the demand outlook was subject to much uncertainty and could contract further depending on factors such as the speed of Japan's recovery from this year's nuclear disaster and tsunami, as well as on the impact of oil prices on developed economies. "Should higher international oil prices persist, or should further setbacks in the OECD economies occur, then it might impose a stronger reverse elasticity on oil demand, putting more weight on the downside risk," Opec said.
The EIA is scheduled to release its July report later on Tuesday while the International Energy Agency, adviser to the United States and 27 other industrialised countries, will do so on Wednesday. At a meeting in June, Opec failed to reach agreement on a Saudi-led proposal to increase output even though the group's own economists forecast a supply gap in the second half of the year.
Saudi Arabia has since unilaterally added some 461,000 bpd to its production in June, compared with May, taking its output to 9.42 million bpd, according to secondary sources cited by the report. As a result of the higher production, Tuesday's report implied the supply gap had narrowed to 1.25 mln bpd from 1.73 million bpd in June's report. Opec output as a whole rose by 520,000 bpd in June compared with May to 29.60 million bpd, the secondary sources found. The report sees the need for Opec crude to rise further next year to 30.3 million bpd from 30 million bpd in 2011.