OPEC cuts world demand forecast
The Organization of Petroleum Exporting Countries (OPEC) said oil production rose for a second month in May,
weakening compliance with quotas, as the group lowered its forecast for global oil demand in 2009.
The 11 OPEC members bound by production quotas, which exclude Iraq, pumped 25.903 mm bpd in May, an increase of 118,800 bpd from April, the Vienna-based organization said in its monthly oil report, citing secondary sources that include estimates from analysts and news organizations.
Oil's 42 % rally since April has encouraged some OPEC members to backtrack on record output cuts announced through
the end of last year after prices slumped. OPEC pledged to adhere with targets more closely at a meeting in Vienna on
May 28 as world demand shrinks. Angola, Venezuela and Nigeria increased output the most in May, the report
"In light of the considerable challenges the world economy and commodity market, particularly the oil market, have undergone, the worst appears to be behind us," the secretariat said in its report. "Prices have not only remained steady, but have even moved higher."
OPEC, which supplies about 40 % of the world's oil, implemented 75 % of planned output cuts of 4.2 mm bpd, compared
with 77 % in April, based on data in the report. The International Energy Agency said the producer group complied
with 74 % of the reductions.
Oil traded above $ 73 a barrel for the first time in seven months on increasing optimism about an economic recovery and as a weaker dollar encouraged investment in commodities. Confidence in the world economy rose for a third month as US job losses slowed and global production improved.
The benchmark crude price used by OPEC, derived from the cost of oil produced by each of its 12 members, averaged $
56.98 in May, about 14 % higher than April, and was at $ 70.87, OPEC said in its report. That's the highest average
in seven months.
The 12 OPEC members, including Iraq, pumped 28.271 mm bpd in May, compared with 28.136 mm bpd in April, according to the report.
As the global economy stabilizes, OPEC said it is expecting the decline in oil demand to slow. The group forecasts
that consumption will shrink by 1.89 % this year, or 1.62 mm bpd, to 83.8 mm bpd. In May, it estimated global demand
would shrink 1.83 %, or 1.57 mm bpd to 84.03 mm barrels.
"World oil demand appears to be settling down," the secretariat said in the report. "Industrial production activities are steadying and in some parts of the world have even improved slightly."
The IEA raised its global oil-demand forecast for the first time in 10 months on signs that the economic slowdown is
abating. The adviser to 28 nations increased its global oil demand estimate for this year by 120,000 bpd to 83.3 mm
OPEC reduced the forecast for demand for its crude as global consumption shrinks. The group estimates it will need to produce 28.6 mm bpd in 2009 to balance global supply and demand, 2.2 mm bpd less than last year. In May, it estimated that it would need to pump 28.8 mm bpd.
OPEC left its forecast for oil supply from outside the group unchanged at 50.52 mm bpd, 210,000 bpd more than in
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.