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IEA, OPEC differ on 2008 oil demand outlook

The gap between forecasts from OPEC and the International Energy Agency underscores the reluctance of the producer group to raise output formally even after a surge in oil prices to a record high near $100 last month.

“Prospects for 2008 are increasingly clouded by the expected slowdown in the US economy,” OPEC’s Vienna-based economists said in the group’s Monthly Oil Market Report for December.

“The improving geopolitical situation and slowing economic outlook should help to further ease the pressure on the market.”

The IEA, adviser to 27 industrialised countries, earlier on Friday was more upbeat, saying global demand will rise by 2.1 million barrels per day (bpd) next year, up 200,000 bpd from its previous forecast.

“A lot of this demand is in the non-OECD countries, where we don’t have any downgrades in economic growth forecasts,” said Lawrence Eagles, head of the IEA’s Oil Industry and Markets division.

But OPEC, source of more than a third of the world’s oil, predicted growth of just 1.3 million bpd, unchanged from the previous forecast, said there were “considerable downside risks” to the economic outlook.

Oil prices gave up most of an earlier gain on Friday, in part because of OPEC’s gloomier view of the market. Crude was up 7 cents at $92.32 a barrel as of 1334 GMTT.

Inventory drop

For much of this year, the IEA has been urging OPEC to raise supply to allow consumers to build up inventories and lower prices.

Stocks in member-countries of the Organization for Economic Cooperation and Development fell by 22.4 million barrels in October to equal 52.6 days of demand, just below the five-year average, the IEA said.

But the Organization of the Petroleum Exporting Countries at a meeting earlier this month decided leave oil supply unchanged, rebuffing consumer calls for more oil.

While the producer group did not raise production formally, the IEA said it expected members to raise output in December and figures on Friday from a consultant supported that view.

The 10 OPEC members bound by agreements to set production policy are forecast to supply 27.7 million barrels per day, up 500,000 bpd from November, said Conrad Gerber of Geneva-based Petrologistics.

Supply is on the increase largely because a period of maintenance ended at oilfields in the United Arab Emirates, said Gerber, who assesses OPEC supply by tracking tanker shipments.

While lifting next year’s demand outlook, the IEA also trimmed a forecast for growth in oil demand in the last quarter of 2007 and said the market was “more comfortable” with the supply and demand balance.

“Overall, winter prospects have clearly improved,” the IEA said. “But $90-a-barrel oil makes clear that the market is still on edge and is unlikely to relax until the peak weather risks have subsided.”