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Tue 17 Apr 2007 03:00 PM

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OPEC dismisses calls for more oil output

Cartel says demand for its oil this year would be less than previously forecast.

OPEC on Monday dismissed calls to pump more crude, saying supply was enough and demand for its oil this year would be less than previously forecast.

Oil consumers, as represented by the International Energy Agency (IEA), have been urging OPEC members to open the taps to refill inventories and lower prices. U.S. crude has jumped to above $62 a barrel from below $50 in mid-January.

In its April monthly oil market report on Monday, OPEC cut the forecast for demand for its oil in 2007 by 120,000 barrels per day to 30.28 million bpd and said pumping more crude would not solve gasoline supply problems.

"In contrast to the current tightness in the gasoline market, global crude oil fundamentals appear to be largely in balance at current OPEC production levels," the report said.

"Given ample crude supplies, it is clear that increasing production would only serve to build crude oil inventories and would not resolve the tightness in the downstream."

In the United States, the top oil consumer, rising gasoline demand and refinery outages have drained inventories and pushed up prices. Oil traders focus on U.S. gasoline supply in spring and summer as demand grows ahead of the summer holiday season.

The report by economists at the Vienna headquarters of the Organization of the Petroleum Exporting Countries left expected global growth in oil demand in 2007 steady at 1.3 million bpd, or 1.5%.

Based on current estimates, the group may not need to pump more oil this year, its head of research said.

"So far, it looks like in the current year there is no need for an increase," Hasan Qabazard, head of OPEC's research division, told Reuters.


Oil prices eased on Monday after an earlier gain, with U.S. crude down 90 cents at $62.73 a barrel by 1435 GMT.

The drop in OPEC's forecast for demand for its crude in 2007 stems from an increase in its expectation for supply from non-member countries, such as Mexico.

Non-OPEC supply is expected to average 50.72 million bpd this year, up 1.26 million bpd from 2006 and 83,000 bpd higher than expected last month.

OPEC's report showed that the group, source of more than a third of the world's oil, is still removing barrels from the market following agreements last year to trim supply.

The 10 members, excluding Iraq and Angola, that are bound by production cut deals lowered output in March by 66,000 bpd to 26.37 million bpd, it said, citing data from secondary sources.

OPEC oil ministers opted to maintain supplies at a meeting in March. At their two previous meetings, they agreed to curb output by 1.7 million bpd, roughly six percent.

There is no need for OPEC to meet before a scheduled gathering in September "unless there is some abnormal disruption in the market," the group's secretary general, Abdullah al-Badri told Reuters.

The IEA, an adviser to 26 industrialised countries, has frequently called on OPEC to pump more oil and warned last week that the group may have tightened the market too much.

In its April monthly report last week, the IEA said oil stocks in consumer nations were headed for the biggest first quarter drop in a decade and may fall further in coming months.

"Current OPEC production could imply a further marked tightening in stocks in months to come," the IEA report said.

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