OPEC sees enough oil supply, risks to Q2 demand

LONDON (Reuters) - OPEC is pumping enough oil to meet demand and the U.S. economic slowdown could lead to weaker-than-expected consumption in the second quarter, the group said on Tuesday.

The comments, in OPEC's latest Monthly Oil Market Report, underscore the group's reluctance to pump more oil to lower record prices near $113 a barrel, which it says are being lifted by factors beyond supply and demand.

"The fundamental picture in the second quarter of 2008 appears to be in line with the typical seasonal pattern for this time of year," the report by economists at OPEC's Vienna headquarters said.

"Current OPEC production at more than 32 million barrels per day (bpd) will be sufficient to both meet demand growth and contribute to further stockbuilds."

OPEC expects world oil demand to decline by 1.4 million bpd to 85.7 million bpd in the second quarter, when oil use typically slows as consumers in the northern hemisphere burn less heating fuel.

But the weakening economy in the U.S., the world's largest oil consumer, means the decline could be steeper.

"With growing concerns about the slowing U.S. economy and higher gasoline prices, there is a chance that the decline could be more pronounced, leading to even lower demand in the second quarter," OPEC said.

The 13 members of the Organization of the Petroleum Exporting Countries pump about two in every five barrels of oil.

DEMAND GROWTH STEADY

OPEC left its estimate for growth in world oil demand this year unchanged at 1.2 million bpd.

Strong consumption in places such as China and the Middle East is expected to offset weak demand in members of the Organization for Economic Co-operation and Development.

OPEC trimmed its estimate for supply from non-member countries in 2008, leading to a small increase in the amount of oil its 13 members need to pump to balance the market.

It expects non-OPEC supply to average 50.28 million bpd this year, about 90,000 bpd less than previously forecast in part due to lower output estimates from the United States and Mexico.

Demand for OPEC oil is seen averaging 31.75 million bpd in 2008, lower than the group's current output and 70,000 bpd higher than last month's estimate.

At its last three meetings, held in December, February and March, OPEC rebuffed calls from consumers, including the United States, to raise supply, saying the world had enough crude.

The group has not scheduled another meeting until September and officials have said there is no need to gather before then.

(Reporting by Alex Lawler; editing by Peg Mackey)