World oil demand growth brings OPEC dilemma

But OPEC will face a dilemma because non-OPEC producers can easily supply the extra oil if they hit their output targets, according to the survey.

“OPEC in 2007 will have to look hard at their balances and may need to make some judicious cuts,” said Paul Tossetti, director of market analysis at Washington-based PFC Energy.

“That is, though, assuming that all these non-OPEC projects come online.”

Analyst polled by Reuters trimmed their forecast for 2006 oil demand growth to 1.24 million barrels per day, 60,000 bpd down on the last poll in June. They projected growth would accelerate to 1.47 million bpd in 2007.

At the same time the poll showed demand for OPEC crude oil falling 230,000 bpd in 2007 to 29.32 million bpd. That is a downward revision of 540,000 since the June poll.

The Organization of the Petroleum Exporting Countries’ own economists were among the most bearish about the need for OPEC crude, predicting a drop of 800,000 bpd.

Some analysts say slowing economic growth will further erode demand for OPEC oil.

“We are definitely seeing more people out there talking about an economic slowdown, especially in the United States,” said Katherine Spector, head of energy research at JP Morgan Securities.

A drop in demand for OPEC crude would bring at least one benefit -- the opportunity to rebuild spare capacity from around 2 million bpd at present. Still, spare supply is unlikely to grow enough to satisfy consumers that the oil industry globally can deal with a major supply disruption.

“OPEC’s lack of spare capacity is a major factor which provides huge leverage to today’s disruptions and geopolitical threats,” said analyst Geoff Pyne in a report for ABN Amro Commodity Derivatives.

“OPEC spare capacity should increase to around 2.5 million bpd next year, but this seems unlikely to be enough to affect market perceptions.”