Oil Has Been Down Sharply

OPEC: Demand for crude will drop in 2007 cnn.com

Oil cartel says demand for its crude should slip by 800,000 barrels per day next year, cites expected jump in non-OPEC supply.

September 15 2006: 12:55 PM EDT

LONDON (Reuters) -- The Organization of the Petroleum Exporting Countries on Friday lowered a forecast for demand for its oil next year, when supply from rival producers is expected to surge.
Demand for OPEC crude, known as the call on OPEC, in 2007 will average 28.1 million barrels per day, 200,000 bpd less than forecast in August, the 11-nation producer group said in its September monthly report.
The outlook follows OPEC's decision this week to keep its oil output near a 25-year high despite a roughly $15 drop in prices since mid-July. But the group left the door open to a supply cut before the end of the year.
In its communiqué after the group's oil ministers met in Vienna on Monday, OPEC said non-OPEC supply in 2007 would rise at the fastest rate in more than two decades. OPEC pumps more than a third of the world's oil.
"The rebound in non-OPEC supply in 2007 is predicted to be at its highest level since 1984 - and market fundamentals indicate a clear imbalance between supply and demand," OPEC said in the communiqué.
Average demand for OPEC's oil next year will be 800,000 bpd less than the 28.9 million bpd expected in 2006, the report said.
While OPEC expects supply from outside producers to rise by 1.8 million bpd next year, analysts said that the chance it may underperform could increase the burden on OPEC.
"The call on OPEC could be much higher than they say," said Geoff Pyne, an independent analyst. "The risk must be non-OPEC supply won't materialize. That's certainly been the past risk."
Growth in non-OPEC supply has fallen short of forecasts in recent years, such as in 2005 when hurricanes hit oil facilities in the Gulf of Mexico, disrupting output.
In its report, OPEC also trimmed a forecast for growth in world oil demand in 2006 by 100,000 bpd to 1.2 million bpd, citing weaker than expected summer gasoline demand in the top oil consumer, the United States.
OPEC left its outlook for global demand growth next year at 1.3 million bpd, the same as last month.
The "world oil demand growth forecast for the year 2007 remains unchanged," the report said. "As in the current year, the lion's share of oil demand growth in 2007 will come from developing countries."