OPEC on Wednesday slightly revised up its forecast for world economic growth but left 2010 oil demand largely unchanged as Europe's debt crisis, an oversupply of crude in the market and a potential cooling in China's growth pointed to “economic signs that are not rosy.” Separately, according to a study released Wednesday by BP PLC (BP), the world's thirst for oil abated last year, with global consumption dropping by 1.2 million barrels a day in the biggest decline since 1982, The Organization of the Petroleum Exporting Countries said world economic growth this year was revised up to 3.8 percent in June from the previous month's 3.5 percent forecast. The gain was driven mainly by improved performance in the Japanese economy which it forecast to grow by 2.7 percent this year compared to last month's 1.5 percent projection. “While the global economy seems to be enjoying solid momentum in the first half (of 2010), concerns about growth in the second half remain due to euro-zone sovereign debt problem, the ability of China to avoid overheating and the still high unemployment” in industrialized nations, OPEC said in its June Oil Market Report. The 12-nation group that supplies about 35 percent of the world's oil has seen the price of its member states' chief export drop from nearly $87 earlier in May to around $70 per barrel this month. The slide came as concerns mounted about a spillover from Greece's debt crunch that would undercut the fragile economic recovery taking place in the world and, by extension, oil demand. “With half of the year already passed, economic signs are not that rosy,” the report said, adding however that increasing world economic growth rates offered hope that oil demand would be supported. For more than a year, the group has refrained from changing its output quotas to boost prices. Saudi Arabia and others have said oil at between $70-80 per barrel is fair for both producers and consumers. The producer bloc is slated to meet in October to discuss whether to revise its output ceiling, but several ministers have indicated that a cut was unlikely given that members were already producing far more than their quotas. It said given the current oversupply in the market, demand for OPEC crude was revised down to 28.8 million barrels per day - a drop of 70,000 barrels per day from May forecasts. “This would leave no room for additional crude supplies in the market,” OPEC said, even as it predicted non-OPEC production would climb this year by 640,000 barrels per day. OPEC lowered its world oil demand growth forecast by 10,000 barrels per day, at 940,000 barrels per day. That put 2010 world demand at 85.37 million barrels per day or 1.12 percent more than the previous year. “Although demand has seen some improvement recently, this has been more than overwhelmed by the higher growth in supply,” OPEC said. “Additionally, in light of the ongoing risks, there is considerable uncertainty on the outlook for the second half of the year.” The producer group said the United States - particularly with the approaching summer driving season - would “play a major role in total oil consumption” this year, even as China's oil demand had been “a back up and offsetting the loss in OECD oil demand.” “Energy developments in 2009 were dominated by a global recession and, later in the year, a tentative recovery,” said Tony Hayward, BP's embattled chief executive who's become a fixture on television and in newspapers in the aftermath of the massive Gulf of Mexico oil spill nearly two months ago. “We can't know how durable this recovery will be,” he added. “But the data show changes in the pattern of global energy consumption that are likely to indicate long-term change.” Proven oil reserves rose by 700 million barrels to a total of 1.33 trillion, thanks to increases in Brazil, Denmark, Saudi Arabia, Egypt and Indonesia, according to BP's statistical review for 2009. It also showed proven reserves fell in Mexico, Russia, Norway and Vietnam. Meanwhile, refining capacity around the world grew by 2.2 percent to 2 million barrels a day during 2009, due mostly to increases in China and India, BP said. At the same time, US oil production surged by 460,000 barrels a day, the biggest increase in the world and the strongest US growth in 40 years. Globally, the report indicated that oil production fell by about 2 million barrels a day. World oil prices surged on Wednesday, winning support from rebounding equities, global economic optimism and falling crude inventories in top energy consumer the US, analysts said. New York's main futures contract, light sweet crude for delivery in July, jumped $2.85 to $74.84 a barrel. Brent North Sea crude for July leapt $2.25 to $74.55 per barrel in London trade.
