U.S. expects tight global oil supply to ease

By Tom Doggett

WASHINGTON (Reuters) - A combination of slower oil demand growth, higher OPEC crude production capacity and more oil output from other countries will help ease tight global petroleum supplies, the U.S. government's top energy forecasting agency said on Tuesday.

"The outlook over the next two years points to an easing of the oil market balance," the Energy Information Administration said in its latest monthly forecast.

"Higher production outside of the Organization of the Petroleum Exporting Countries (OPEC) and planned additions to OPEC capacity should more than offset expected moderate world oil demand growth and relieve some of the tightness in the market," the U.S. Energy Department analytical arm said.

Global surplus oil production capacity is expected to jump from less than 2 million barrels a day currently to more than 4 million barrels per day by the end of 2009, the EIA said.

"This balance suggests some price softening, although delays or downward revisions in capacity additions in both OPEC and non-OPEC nations could alter the outlook, as could OPEC production decisions," the agency warned.

So far this year OPEC has refused to boost output because of fears a weaker global economy will reduce oil consumption. The group meets again in March to review its production levels.

While available oil supplies are expected to increase globally, crude inventories held by industrialized nations still will remain below the five-year average throughout this year, but then increase toward the five-year average by the end of 2009 thanks to more non-OPEC oil output, the EIA said.

The EIA cut its estimate for world oil demand this year by 260,000 barrels a day and by 140,000 barrels per day for next year.

As a result of weaker demand, crude oil prices are forecast to fall from current levels of around $93 a barrel to an average $86 for this year and $82 in 2009.

"There is also significant downside price potential if a larger-than-expected slowdown in the world economy leads to lower oil consumption growth than is currently expected," the EIA said.

In the United States, a weaker economy forced the EIA to slash its forecast for U.S. oil demand growth this year by almost half to 140,000 barrels a day.

There will be plenty of gasoline supplies at the start of the busy U.S. driving season on April 1, with motor fuel inventories expected to be at 218 million barrels, 16.3 million more than last year and 12.5 million barrels above the 5-year average, the EIA said.

Still, pump prices will be much higher, peaking at a monthly average of $3.40 a gallon this spring, the agency said.

(Reporting by Tom Doggett; editing by Jim Marshall)