THE Organization of Petroleum Exporting Countries (Opec), cut its forecast for 2006 global oil demand growth by 110,000 barrels per day recently, due to slower consumption in the US and Asia.

Opec pegged global demand growth for the year at 1.46 million barrels per day, down from its forecast in its monthly report in February at 1.57 million bpd. Despite high oil prices, demand growth was still much stronger than in 2005, when world consumption rose by close to a million bpd.

Opec ministers agreed to keep output unchanged at near 25-year highs at their meeting in a bid to bring down high prices and to counter market concern about the potential for major supply disruption. Despite brimming stock, the US oil was trading well over $63 a barrel on March 17.

Global demand in 2006 was expected to come in at 84.51 million bpd. Opec expects to supply just over a third of that, pegging demand for its crude at 28.4 million bpd. That was 100,000 bpd less than Opec’s demand forecast for its own crude in last month’s report, and 200,000 bpd less than demand for Opec crude in 2005.

Opec, citing secondary sources, said it produced 29.7 million bpd in February, up 160,000 bpd from January. The group also trimmed its expectation for supply from non-Opec producers by about 60,000 bpd to 1.4 million bpd. Non-Opec was expected to produce around 51.5 million bpd in 2006.

But Opec said there were still major uncertainties for non-Opec performance, including the rate of recovery in the US Gulf to Mexico from last year’s hurricanes and the impact of prolonged shutdowns in Norway.

The International Energy Agency (IEA) said recently that robust economic momentum, threats to oil supplies from key producers and rising demand could combine to sustain high oil prices in the next few months.

The IEA, in its monthly market report said: “A look at fundamentals suggests that while there may be some justification for a moderation in prices, the road ahead is far from smooth.” It said crude futures in New York lost an average of $3.61 per barrel in Februasry to reach an average of $61.93.

The agency issued a downward revision to its estimate of global oil demand growth this year, foreseeing an increase of 1.8 per cent rather than the 2.1 per cent forecast in its February report, in the face of high prices and demand sluggishness in Southeast Asia.

Demand growth should come to 1.49 million barrels per day in 2006 instead of 1.78 million. But it said the projected figure for 2006 was still far higher than demand growth of 1.02 million bpd in 2005, with China and North American driving the rebound.

The report also highlighted an upturn in Iraqi output to the highest level since September 2005, an increase of 335 thousand bpd in February to 1.84 million barrels per day, boosted by a sharp recovery in exports and despite violent unrest and political wrangling at the highest levels.

Overall global supply increased by 490 thousand bpd in February to 84.6 thousand barrels per day. Output from the 11-member Organisation of Petroleum Exporting Countries (Opec) rose 220 thousand barrels per day from January to an average of 29.6 million bpd in February.

The IEA, which monitors energy conditions for the world’s leading industrialized states and oversees supply arrangements in times of crisis, said that in 2006 there would probably be “a modest increase” in spare production capacity that should “keep global supply trends broadly in line with global demand in 2007 and 2008.”

In its assessment of demand trends, the IEA said demand growth in China should come to six per cent for 2006. In Europe the report noted the increasing use of diesel fuel by motorists. It found that western European countries are now retiring vehicles of which about 85 per cent are fuelled by petrol (gasoline) and replacing them with new cars, about 50 per cent of which are diesel powered.

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