OPEC cuts its forecast for global oil demand and production, citing the slowing economic recovery in its monthly report. The Organization of Petroleum Exporting Countries expects global demand to decline to 1.1 million barrels per day worldwide, a reduction of 150,000 barrels a day from its earlier forecasts.
OPEC also trimmed its oil production outlook, saying output should increase by 500,000 barrels a day rather than the 580,000 barrels a day previously forecast.
“The downward adjustment has been due to a weaker-than-expected driving season in the U.S. and the ongoing sluggish economic performance in the OECD,” said the report. The Organization for Economic Co-Operation and Development has 32 member nations, including the U.S., the U.K., Germany, and Japan. The forecast for global economic growth has fallen to 3.6% for 2011 from a previous forecast of 3.7%, and down to 3.9% for 2012 from the previously expected 4%.
Meanwhile, low demand has caused crude prices to drop in the U.S. by 4.5% so far this year, to about $88 a barrel. However, Goldman Sachs (NYSE:GS) analysts expect that crude to average $126.50 a barrel next year, saying that the “tight” oil supply has been alleviated by the release of 600,000 barrels a day by the Strategic Petroleum Reserve for the last seven weeks, but that will ultimately end.
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“We therefore expect that the market will tighten further for the remainder of the year and going into next year as this source of supply disappears, effectively drawing down OPEC spare capacity and pushing prices higher,” said Goldman analysts, who also reiterated their forecast that Brent oil prices, currently trading around $113 a barrel, would average $130 a barrel next year. Brent is the European benchmark to which U.S. gas prices are closely tied, with many U.S. refineries using imported oil to produce gas.