Oil price pressure eased by slowing economy, OPEC says

Dec 14, 2007, 14:57 GMT

Vienna - The Organization of Petroleum Exporting Countries (OPEC) said on Friday that relief to current high oil prices was expected in 2008 due to weaker economic growth, but at the same time warned against the risks of an economic slowdown.

In its monthly Oil Market Report for December, OPEC said demand for oil would grow by 1.54 per cent or 1.3 million barrels per day in 2008, unchanged from previous estimates.

Fast-growing demand for transport and industrial fuel were the main motors of the demand increase, OPEC said.

For 2007, the cartel said world demand is seen rising by 1.2 million b/d, owing to healthy worldwide demand for kerosine jet fuel in the coming holiday season.

World economies next year would grow by 4.8 per cent compared to a 5.2-per-cent growth rate in 2007, said OPEC, which supplies around 40 per cent of the world's crude oil.

Downside risks were fuelled by the ongoing slowdown of the US economy, OPEC said.

'Prospects for 2008 are increasingly clouded by the expected slowdown in the US economy and other OECD (Organisation for Economic Cooperation and Development) regions, and by continued turbulence in financial markets in the wake of the deepening subprime mortgage crisis,' the report said.

The slowing economy and a general improvement of the geopolitical situation could help 'ease the pressure' on the oil market, OPEC said.

Earlier Friday, OPEC reported that on Thursday, the price of its oil had jumped by 1.64 dollars to 88.35 dollars per barrel.

OPEC's forecast came as meanwhile the International Energy Agency (IAE) in Paris projected higher world demand for oil next year than what the cartel predicted.

The IEA said that world demand next year would average 87.8 million b/d, with the projection 115,000 b/d higher than the group's previous forecast. It said demand would rise primarily because of the needs of developing nations.

However, the IEA lowered its forecast for global oil demand for this year by 60,000 barrels per day, to 85.7 million barrels per day, or 1.1 per cent higher than in 2006.

If the IEA's 87.8 million b/d projection bears out, then it would mean an overall rise of 2.1 million b/d next year, or around 2.5 per cent, compared with this year's estimated demand. OPEC's projection, by comparison, is for a 1.3 million b/d rise, or over 1.5 per cent.