OPEC Reduces Oil Demand Forecast as Recession Deepens (Update1)

Feb. 13 (Bloomberg) -- The Organization of Petroleum Exporting Countries cut its forecast for oil demand this year for a sixth straight month as the economic slump causes a “sudden and massive” drop in consumption.

The estimate for 2009 global demand was lowered by 530,000 barrels a day to 85.13 million barrels a day, the producer group said in a monthly report today. Demand will contract by 580,000 barrels a day this year, or 0.7 percent. OPEC forecast a decline of 0.2 percent last month.

“The deterioration in the world economy has led to a significant reduction in global oil consumption,” OPEC’s Vienna- based secretariat said. “The sudden and massive erosion in demand has helped push crude oil inventories up sharply.”

OPEC agreed to a record 9 percent reduction in supply targets at its last meeting in December to halt the falling price of oil, which has dropped more than $100 a barrel in New York in the past six months. The group, which supplies more than 40 percent of the world’s oil, said the cuts appear to have succeeded in stemming the rout in prices “despite a steady stream of negative economic and demand data.”

Oil Down

Oil is down 23 percent this year and is more than $110 a barrel lower than a record high of $147.27 a barrel in July. The front-month March crude futures contract traded at $34.35 a barrel on the New York Mercantile Exchange at 9:03 a.m.

The decline in global demand will be led by industrialized nations in North America, Europe and the Pacific rim, OPEC said. Consumption by developed economies will decline 1.13 million barrels a day in 2009, OPEC forecasts, a drop of 2.4 percent compared with 2008.

This decrease will be partly offset by demand growth in developing economies, which OPEC forecasts to rise by 350,000 barrels a day, or 1.4 percent.

Consumption of OPEC’s oil in 2009 will contract by 1.71 million barrels a day to 29.22 million barrels a day, the group said, calculating that figure using its world demand and non-OPEC supply forecasts. That level of demand is about 300,000 barrels a day less than it predicted last month.

OPEC Output

The Paris-based International Energy Agency also cut its global oil demand forecast for 2009 earlier this week, projecting consumption will drop by 1 million barrels to 84.7 million a day.

Oil production by all 12 members of OPEC declined 959,200 barrels a day in January to 28.71 million barrels a day as the group enacted supply cuts, the report said, citing secondary- source estimates that include analysts and news agencies.

The 11 OPEC members excluding Iraq pumped 26.33 million barrels a day in January. That is still above the production quota for this year of 24.85 million barrels a day, agreed by the group in December.

The group will cut shipments by 3.5 percent in February, the biggest monthly reduction in at least five years, according to U.K.-based tanker-tracker Oil Movements.

OPEC has completed about 60 to 70 percent of 4.2 million barrels a day of output reductions announced since September, the shipping consultant said. OPEC has complied with about 80 percent of cuts, Secretary-General Abdalla el-Badri said this week.

Saudi Output

Saudi output fell the most in January, dropping by 322,500 barrels a day, or 3.9 percent, to 7.99 million barrels a day, according to the OPEC report. The country has a production target this year of 8.05 million barrels a day.

OPEC cut its forecast for oil supply from outside the group to 50.89 million barrels a day. That still leaves an increase of 550,000 barrels a day, or 1.1 percent, this year over 2008.

Indonesia left the producer group this year. OPEC’s 12 remaining members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

The benchmark crude price used by OPEC, derived from the cost of oil produced by each of its 12 members, averaged $41.52 a barrel in January and was at $41.79 yesterday, OPEC said it its report today.