OPEC on Wednesday cautioned that a sustained increase in oil prices above their current level could erode crude demand next year amid a shaky global economic recovery.
Citing continuing signs of a global economic recovery, the Organization of the Petroleum Exporting Countries _ supplier of about 35 percent of the world's crude oil _ revised its estimate for 2010 global demand growth to 750,000 barrels per day. That's up slightly from its 700,000 barrels per day estimate the previous month.
"Although most of signs are pointing toward higher oil demand," OPEC said in its November Monthly Oil Market report, "a potentially weak economic recovery along with higher oil prices are the two main factors that may dampen world oil demand in the coming year."
"Should prices increase and be sustained above the current level, oil demand growth will be pushed down by more than 1 percent in the OECD countries," the report said, referring to the Organization of Economic Cooperation and Development.
The cautiously optimistic projection of rebounding demand underscores the uncertainty lingering in the world energy market.
While oil prices have more than doubled since plummeting to the low-$30s per barrel late last year, the world is still far emerging completely from its worst recession in over six decades. The crisis battered oil demand, depriving bloc members of sales of their chief export and source of government revenue.
Global economic growth rate projections are slowly starting to inch back into positive territory, but worries run high that the current recovery could be jeopardized by a number of factors, including higher oil prices.
OPEC said the global economy is forecast to grow at 2.9 percent after a 1.1 percent contraction in 2008. It said most of the growth is expected to come from emerging Asian countries the main driver in the world's economic growth.
"Even if the expected economic recovery materializes, it remains to be seen whether demand would be able to return to pre-crisis levels," the report said. "Energy policies and behavioral changes are bound to have some impact on consumption and this will gradually feed into overall demand patterns, especially in key sectors such as transportation."
OPEC's 12 member states have held off from announcing any new production cuts since a series of announcements late last year aimed at cutting their combined output by a record 4.2 million barrel per day. That reduction is credited with helping engineer a rebound in the price of crude, which had collapsed from almost $150 per barrel in mid-2008 to near $30 per barrel by the end of the year.
By late afternoon Wednesday Singapore time, the benchmark U.S. crude contract for December delivery was hovering slightly below $79 per barrel in electronic trading on the New York Mercantile Exchange.
OPEC kingpin Saudi Arabia, home to the world's largest proven reserves of conventional crude oil, has said it sees $75 per barrel as a fair price for both consumers and producers _ a level that will encourage continued investments needed to ensure that supply meets future demand for oil. Other OPEC members have indicated a desire to see prices at closer to $80 per barrel.
At its September meeting, OPEC members said they were content with the direct in which prices were heading. While voicing worries about high oil stock levels globally, they decided to hold production steady and focus on shoring up faltering compliance with existing production quotas.
The lack of production discipline, however, appeared to continue. The OPEC report said the group's production averaged 26.52 million barrels per day in October, a 50,000 barrel per day increase from September. Those figures do not include production from Iraq, which is not included in the quota restrictions.
The producer bloc is scheduled to meet Dec. 22 in Angola to discuss production levels.