World demand for OPEC's oil will be stronger than expected next year, the producer group said on Tuesday, adding to signs that an improving economic outlook will boost oil consumption.The 12-member group is the latest forecaster to lift its oil demand estimates in the past week, following upward revisions from the International Energy Agency and the US government's Energy Information Administration.
Demand for OPEC crude will average 28.39 million barrels per day (bpd) in 2010, the Organisation of the Petroleum Exporting Countries said in a monthly report. That is up 300,000 bpd from its previous forecast.
"The world economy now appears to be entering into a new phase, moving from a period of containing the crisis to one of economic recovery," OPEC said in its October Monthly Oil Market Report.
OPEC, source of more than a third of the world's oil, also raised its forecast for global oil demand growth in 2010. It expects world oil use to rise by 700,000 bpd to an average of 84.93 million bpd.
The growth rate is up 200,000 bpd from the previous estimate. Still, OPEC only expects demand to expand at about half the rate of the IEA, an adviser to 28 industrialised countries, in 2010.
"With its economic and oil demand forecasts, OPEC is more conservative than some other forecasts," said Mike Wittner, analyst at Societe Generale. "On the other hand, OPEC is revising demand growth upwards and seems to moving in a more optimistic direction."
Oil prices rose on Tuesday, boosted by the prospect of stronger demand and a weaker dollar. U.S. crude was up 44 cents at $73.71 as of 1448 GMT, nearing its 2009 high of $75.00.
The world economy is expected to expand by 2.7 percent next year after a 1.2 percent contraction in 2009. Next year's forecast is up from the growth rate of 2.5 percent previously assumed.
While oil use in top consumer the US is rebounding from a steep decline, emerging economies such as China, the Middle East, India and Latin America are expected to drive demand growth next year, OPEC said.
Since September last year, OPEC has been holding down its production as the recession eroded demand. The group agreed at a Sept. 9 meeting to keep in place supply curbs totalling 4.2 million bpd.
The report said OPEC production was rising, despite the agreement last month to hold output steady.
In September, supply from the 11 OPEC members subject to output targets - all except Iraq - rose to 26.42 million bpd, OPEC said. That cut compliance with output curbs to 62 percent from 64 percent in August.
Including Iraq, OPEC pumped 28.9 million bpd in September, more than the report's estimate of the need for OPEC oil next year. Without a further demand recovery or a shortfall in supply from non-member countries, that suggests little room for OPEC to raise its output targets in 2010.
While seeing a more positive economic outlook, OPEC sounded a note of caution. It next meets to decide its oil output policy in December.
"Given weak oil market fundamentals as reflected in high global inventories and large OPEC spare capacity, there is a need for continued close monitoring of both economic conditions and developments in the oil market. (Reuters)