OPEC today shaved its estimate for growth of world demand for oil this year, saying that the global economy seemed to be slowing down.
The cut in estimated demand was 'due to a slowdown in economic activity in some regions and preliminary demand figures pointing to lower consumption in the first-half of the year', particularly in China, an OPEC report said.
The Organisation of Petroleum Exporting countries cut its estimate for oil demand in 2005 by 150,000 barrels per day, putting total annual growth for the year at 2%, or an extra 1.62 million barrels per day compared to 2004.
In 2006, growth is expected to slow to 1.85%, with growth in developing countries including China expected to be twice as much as in the 30 industrialised countries represented by the OECD.
'On a regional basis, the largest contributor to demand growth is expected to be developing countries' the report said.
However, OPEC signalled that it expected to increase the cushion it was able to offer in terms of unused capacity to pump oil. Spare capacity, which could be called upon if needed, is forecast to expand to 12% in 2006 from 7.9% in the second half of 2005.
The report came just days after a study by the International Energy Agency warned that current high oil prices were here to stay.
The IEA, which itself had been uncertain about the emerging dominant trends in the oil market in recent months, warned that oil prices were likely to remain high and that the dominant immediate factor was 'fear of the unknown' in terms of hurricanes, bomb attacks in London and instability in Iraq.
According to the OPEC figures, increased production in non-OPEC countries will cover a large part of the extra demand next year.
Countries outside the oil cartel are expected to produce an extra 1.08 mbd in 2006 compared with 2005, although a faltering Russian oil sector remains a cause for concern.
'The net contribution (to growth) from Russia is expected to be just 80,000 to 100,000 barrels per day and is considered the main risk for non-OPEC growth next year,' the report said. OPEC said total oil demand in 2005 would total 83.66 million barrels a day. In 2006, demand is forecast at 85.2 mbd.
The price of oil rose today as Hurricane Emily forced production shutdowns as it tracked towards US drilling facilities in the Gulf of Mexico. On the New York oil market, prices rose to $58.47 a barrel in electronic dealing, while in London the price of Brent North Sea crude oil increased to $57.73 a barrel.
