Opec raised its estimate of how much oil its members should pump, strengthening the case for raising the group's production ceiling.
Opec under more pressure as it raises oil demand estimate
Opec has raised its estimate of demand for its oil by 100,000 barrels a day (bpd), strengthening the case for lifting the group's production ceiling.
Yesterday Opec economists said demand for its crude would increase to 30 million bpd in the second half of the year and would grow to 30.3 million bpd next year in spite of high prices and a shaky economic outlook.
"An unsteady world economy is negatively affecting the oil market," Opec wrote in yesterday's report, adding that sustained high prices could hurt market growth.
"Should higher international oil prices persist, or should further setbacks in the [Organisation for Economic Co-operation and Development] economies occur, then it might impose a stronger reverse elasticity on oil demand, putting more weight on the downward risk."
The warning of the potential effect of sustained high oil prices puts more pressure on Opec, which controls about 40 per cent of the world's crude supply, to reach a consensus on raising its output target.
The report was Opec's first since a group of major consuming nations opened the taps on their strategic crude reserves. The US and the International Energy Agency, the group based in Paris that represents the interests of 28 industrialised oil importers, are putting an extra 2 million barrels on the market every day this month to try to dampen high crude prices and head off an economic downturn.
The price of Brent crude, the European benchmark, has risen as high as US$127 this year since crude supplies have been all but cut off from Opec member Libya by civil war. Yesterday Brent was trading about 1 per cent lower at $115.73 a barrel.
The consuming nations were responding to Opec's failure last month to raise its output target from 24.8 million bpd, a ceiling that has remained unchanged since 2008, and is more than 2 million bpd under actual pumping levels of the 11 nations subject to quota. At the meeting, Saudi Arabia and other Gulf producers lobbied to raise the ceiling but were blocked by seven nations including Iran, the current holder of the group's rotating presidency.
In response, the Gulf states have chosen to go it alone, with the Opec members bound by quota - Iraq is the exception - pumping 26.9 million bpd last month, a 600,000 bpd increase over the previous month.
"We very much regret Opec's decision … to not increase production," Sheikh Abdullah bin Zayed, the UAE Minister of Foreign Affairs, said last month.
"Prices are far too high and unsustainable. We have to do everything possible to calm the market."
Opec's next meeting is scheduled for December, although officials have left open the possibility of an emergency meeting within the next two months.