OPEC sees higher 2004 oil consumption

OPEC on Friday raised its demand forecast for the oil cartel's crude oil this year, seeing China leading strong consumption growth in the fourth quarter, agency reported.

In a monthly report, OPEC's Vienna-based secretariat raised the forecast full-year 2004 demand for its crude oil by 230,000 barrels per day (bpd) to 26.17 million bpd, expecting world demand growth to push to a four-year high.

Oil prices are bubbling near 13-year peaks, driven by rising Chinese demand, low U.S. gasoline inventories and concern that violence in the oil-rich Middle East could disrupt oil supplies.

OPEC raised the forecast second quarter demand on its crude by 100,000 bpd to 24.86 million bpd, and lifted the third quarter 'call' by 110,000 bpd to 25.96 million bpd.

The biggest jump was in the forecast fourth quarter demand which rose by 600,000 bpd to 27.12 million bpd to account for stronger Chinese growth.

Some analysts say that prices are so high in part because OPEC and other forecasting organisations such as the International Energy Agency (IEA) have been underestimating world demand.

"Despite the recent run of revisions, demand may still be being underestimated, non-OPEC supply overestimated and OPEC production overstated," said Barclays Capital in a report.

"The global market is probably considerably tighter than most balances are indicating," it added.

OPEC estimated world oil inventories rose by 1.38 million bpd in the first quarter 2004, following a 710,000 bpd rise in the whole of 2003.

OPEC's report also said estimated cartel production rose in March by 370,000 bpd to 28.30 million bpd, led by a 445,000 bpd jump in Iraq's output as it opened new export outlets.

Output from the 10 OPEC members with quotas fell by just 75,000 bpd to 25.9 million bpd -- some 1.4 million bpd above the formal ceiling in March.

OPEC pledged in mid-February to cut back production but high prices have given them little incentive to enforce the cuts.

OPEC ministers agreed last month to cut official production limits from April 1 by one million bpd to 23.5 million bpd to prevent stocks building too heavily in the second quarter.

OPEC President Purnomo Yusgiantoro of Indonesia said this week the OPEC would continue to produce above quotas while prices stayed strong.(*)