LONDON, (Reuters) – Mounting concerns over a U.S. recession have obscured the demand outlook for OPEC’s oil this year, the producer group said on Tuesday, dimming the prospect of an increase in supplies at its meeting next week.
OPEC, in its monthly oil market report, estimated world economies will grow by 4.7 percent in 2008, down from 5.3 percent the previous year. “With mounting evidence of a slowdown in U.S. economic expansion at year-end, fears of a downright recession have multiplied,” the report said.
Oil prices have tumbled about 12 percent from a record high of $100.09 a barrel earlier this month on fears a U.S. economic slowdown would slow demand growth for the world’s largest energy consumer.
Oil’s fall to around $87 a barrel has relieved pressure on OPEC to boost supplies when it meets on Feb. 1 in Vienna, analysts said.
Several OPEC ministers have hinted the group will keep production steady at next week’s meeting.
The Organization of the Petroleum Exporting Countries projected world oil demand would increase by 1.3 million barrels per day, steady from the previous estimate and much lower than some projections.
The group, which pumps more than a third of the world’s oil, is more pessimistic about demand than the International Energy Agency, which last week lowered its estimate for demand growth to 1.98 million bpd.
OPEC said demand for its oil has become increasingly difficult to forecast due to the unfolding economic picture.
Despite this, the group projected demand for its crude to average 31.52 million barrels per day this year, down 307,000 bpd from the previous year.
“Combined with uncertainty impacting demand growth due to rising fears of a recession in the U.S. and economic slowdown in other regions, this has resulted in an even higher level of uncertainty for the estimated demand for OPEC crude,” it said.
OPEC forecast non-OPEC supply growth to rise 1.08 million bpd from 2007 to average 50.63 million bpd.
Some analysts believe supply and demand fundamentals could be balanced enough in the first quarter for OPEC to begin considering cutting its production later this year. “As things stand right now, we think that OPEC will roll over formal quotas on Feb. 1, but will plan on trimming supply quietly and informally,” said Mike Wittner of Societe Generale.