OPEC nudged its 2010 forecast for global oil demand slightly higher Tuesday, a week before it's due to meet, but cautioned that the pace of the global recovery may affect consumer appetite for its chief export.
The 12-nation Organization of the Petroleum Exporting Countries said in its December Monthly Oil Market Report that world oil demand was expected to increase by 800,000 barrels per day to 85.13 million barrels per day, largely from developing countries. That's a 70,000 barrel per day upward revision from its November forecast.
The group, which supplies about 35 percent of the world's crude, said the market still faced some risks linked in part to the pace of the world's ability to rebound from its worst recession in over six decades.
OPEC noted that oil inventories remain exceedingly high in developed nations and ample stocks of refined petroleum products could continue to affect demand and, as a result, oil prices.
"A more detailed look at the supply/demand balance indicates that fundamentals will continue to be weak in the first half of the year before improving in the second half, as reflected in the demand for OPEC crude," OPEC said.
"Despite the low base in world oil demand in 2009, which suggests a strong increase in 2010 oil demand growth, the possibility of a weak and slow economic recovery could adversely affect oil demand growth," it said.
The report is generally optimistic about the rebound in demand in 2010 after what OPEC described as "one of the worst years" for global oil demand. But it also offers group members a sobering reminder of the challenges they face in trying to support prices for their chief export.
Oil prices hovered below $70 a barrel Tuesday in Asia after dropping the last nine days on investor doubts about a recovery in U.S. crude demand and amid a strengthening dollar.
OPEC ministers meet in Luanda, Angola, on Dec. 22, but several of the bloc's biggest producers have indicated that a change in member quotas was not likely.
Saudi Arabia's oil minister, whose country sits atop the world's largest proven crude reserves and is considered OPEC's kingpin, earlier this month described oil prices as "perfect."
The group has said oil at between $75 to $80 per barrel was a fair price for producers and consumers. But crude has fallen by about $7 per barrel in the past few weeks, in part because of fluctuations in the U.S. dollar and instability in equity markets.
OPEC has left its members' production quotas unchanged since last December, when it announced the last of a series of cuts aimed at bringing their output down by 4.2 million barrels per day. The cuts helped engineer a rebound in crude prices, which had collapsed to the low $30s from a mid-2008 high of almost $150 per barrel.
OPEC said in its report that the demand for its crude was expected to increase 100,000 barrels per day, or 30,000 barrels a day more than its previous month's forecast. It attributed the slight increase to more crude from countries outside the producer bloc.
It also said production from 11 members _ not including Iraq which is currently exempt from the quotas _ averaged 26.61 million barrels per day in November. That increase of 44,000 barrels per day from the previous month showed more erosion in compliance with output levels from the members.
The group is currently producing about 600,000 barrels per day more than it said it should when it announced the December cuts.