World oil demand will contract more sharply than expected this year due to the economic crisis, OPEC said today, an outlook that may bolster the case for further supply cuts.
The Organization of the Petroleum Exporting Countries said global demand will fall by 580,000 barrels per day (bpd) in 2009 to average 85.13 million bpd. Its previous forecast was for demand to contract by 180,000 bpd.
Oil use is falling this year and in 2008, the first drop in more than 20 years, as recession triggered by the banking crisis spreads through all continents. As demand shrinks, crude prices have fallen below $40 a barrel from a record high near $150 last year.
"World oil demand continues its steep decline from last year and is expected to follow this strong negative pattern at least for the first three quarters of the year," OPEC said in its Monthly Oil Market Report.
Still, OPEC's prediction of falling demand is less severe than that of the International Energy Agency, adviser to consuming countries, which said on Wednesday that consumption in 2009 would fall by 980,000 bpd.
Slumping demand is leading to higher inventories, which OPEC said were likely to weigh on prices as demand slows seasonally later in the year.
A US government report on Wednesday showed crude stocks in the world's top consumer rose for a seventh consecutive week to 350.8 million barrels.
"The high and growing stock levels - particularly for crude oil - are likely to continue to disrupt the overall stability of the market," said the OPEC report, which is written by OPEC's economists.
Oil prices eased after the report was released. US crude was down 10 cents a barrel at $33.88 as of 12.36pm.
Reuters