Lower demand for Opec oil

The Organisation of the Petroleum Exporting Countries expected demand for its crude to be lower than normal this year because of a higher supply from rival producers, indicating inventories could build up substantially if the producer group maintains current output.

The Opec monthly report indicated world supply will comfortably outstrip demand in the first half of this year, even after top exporter Saudi Arabia cut its production in December to fend off a supply overhang and defend prices well above $100 a barrel.

It forecast demand for Opec crude this year would average 29.65million barrels per day, down 100000 barrels per day from last month.

This is less than Opec's December production of 30.37million barrels per day, as estimated by secondary sources.

Demand for Opec crude will average 29.07million bpd in the first half of this year, the report estimated, implying inventories could build up by about 1.3million bpd should Opec maintain December's output rate.

Opec has a target for its 12 members to produce 30million bpd. With prices above Saudi Arabia's preferred $100 but with expectations of slower demand in early 2013, Opec at a meeting in December left the target unchanged, leaving the door open to informal supply tweaks depending on demand.

Saudi Arabia told Opec it produced 9.025million bpd in December, down from 9.49million bpd in November, confirming figures provided last week by an industry source familiar with Saudi policy.

Record Saudi output last year of up to 10million bpd helped to cushion the impact of Western sanctions on Iran over its nuclear programme by helping to bring prices down from a 2012 high of $128 in March.

The other significant cutbacks in Opec output in December were due to technical and political setbacks in Iraq.

Other Opec producers may not join Saudi Arabia in voluntarily curbing output. The United Arab Emirates sees no need to do so since the market is well balanced, the country's oil minister said yesterday.