As oil demand grows, OPEC needs to up output: Reuters poll

NEW YORK Tue Jun 7, 2011 7:52pm EDT

NEW YORK (Reuters) - Global oil demand is growing faster than analysts expected just six months ago, according to a new Reuters poll that could bolster the case for OPEC to open the taps at Wednesday's meeting in Vienna.

The poll of 10 top oil analysts showed oil demand will grow by 1.5 million barrels per day (bpd) this year to hit a record 89 million bpd. At that level, global use will have risen by 5 percent since the depths of the recession in 2009.

The forecast for demand this year is 300,000 bpd higher than it was in the last Reuters poll in December, based on strong emerging market growth. And early indications for 2012 suggest growth will quicken further.

Expectations for additional crude oil supplies from countries not in OPEC have also risen by 500,000 bpd, but the loss of Libya's output has stepped up pressure on the group.

The so-called 'call on OPEC' -- the mathematical difference between supplies not produced under OPEC's quota system and global demand -- has eased marginally to 30 million bpd from 30.2 million bpd. But that still implies OPEC, including Iraq who is outside the output target system, needs to raise real output by 300,000 bpd compared with last year's levels.

"The need for OPEC crude in the upcoming quarters is unambiguously clear," said Barclays Capital analyst Amrita Sen, adding that demand is expected to be especially strong in the second half of the year.

Demand for conventional OPEC oil would be even higher without the expected 500,000-bpd rise in OPEC production of crude-like natural gas liquids (NGLs) and other fuels not covered by output targets. The forecast for OPEC NGL output is unchanged from December at 5.8 million bpd.

OPEC MEETS IN VIENNA

The OPEC secretariat's analytical arm is among the least bullish forecasts on demand, forecasting just 88.1 million bpd of consumption in 2011. By contrast, Deutsche Bank forecasts demand at 89.6 million bpd.

JP Morgan, which said in May that Brent crude could jump to $130 a barrel in the third quarter, said demand is expected to average 89.4 million bpd this year, though it also forecast the highest figure for non-OPEC supply. The bank's expected call on OPEC is one of the lowest at 29.6 million bpd.

That call is shared with Goldman Sachs, its main rival for the title of the largest investment house in commodity markets. Goldman has cut its 2011 demand estimate by 300,000 bpd since December, but has said it remains bullish of oil prices in the medium-term due to concerns about the amount of spare production capacity within OPEC.

Brent crude oil prices have risen from around $90 at the end of last year to near $115 currently, and are on course to average a record $110 or more for 2011.

Saudi Arabia said on Tuesday it is planning to lift oil output by 500,000 bpd this month to between 9.5 million and 9.7 million bpd in a bid rein in prices, even if OPEC fails to raise production targets or actual output. Many analysts agree that demand is only going to get stronger from here.

"The seasonality in the oil market means that peak demand is the third going into the fourth quarter," Nic Brown, head of commodity research at Natixis told Reuters Investment Outlook Summit in London on Tuesday.

"There's danger we will see a sharp drop in crude stocks around the world."

The U.S. Energy Information Administration (EIA) raised its forecast for demand growth on Wednesday to 1.7 million bpd, putting it higher than both OPEC and the IEA.

FASTER GROWTH IN 2012 - CAN OPEC RESPOND?

Early forecasts for demand next year from Morgan Stanley, Deutsche Bank, Goldman Sachs and the EIA show the potential for supply to grow by around 1.8 million bpd in 2012, with an average forecast of 90.8 million bpd.

The average forecast for the call on OPEC crude next year is 31.4 million bpd, 1.4 million above the 2011 estimate.

Goldman Sachs has argued such rapid demand growth could test OPEC's ability to keep the market comfortably supplied.

"We expect OPEC will raise actual production levels in the second half of 2011 and will need to move to operating at its effective capacity limits in 2012," Goldman analysts said in a note on Wednesday.

(Additional reporting by Dmitry Zhdannikov and Zaida Espana in London; Editing by Lisa Shumaker)