Opec cut its forecast for global oil demand growth in 2008 for a fifth month and said production is more than adequate, signalling a more comfortable supply and demand balance.
The 13-member group also said higher Opec production, easing political tension and a stronger US dollar indicated a weaker outlook for the oil market.
"Given these trends, risks to the outlook for the world oil market appear to be on the downside," Opec said in its August Monthly Oil Market Report.
"The softening economic situation has led to a further slowdown in oil demand growth."
Opec’s outlook adds to evidence that slowing economies are eroding fuel use. Oil has fallen sharply to about $113 a barrel from a record $147.27 a barrel on 11 July, pressured in part by the weakening outlook for demand.
Oil demand will rise by 1 million barrels per day this year, 30,000 bpd less than the previous forecast, Opec said in the report. That was the fifth reduction this year, after cuts in July, June, May and February.
Opec’s in-house economists based at the group’s Vienna headquarters prepare the monthly report. Opec oil ministers, who set the group’s supply policy, are scheduled to meet on 9 September, a Reuters report said.
The group left its forecast for world consumption growth in 2009 unchanged, predicting a rise of 900,000 bpd. The group left its estimate for supply growth from non-member countries steady at 950,000 bpd next year.
Opec said that demand for its crude is expected to average 32.05 million bpd in 2008, lower than the group’s production in July of 32.64 million bpd.
"With current Opec production well above the expected demand for Opec crude, there is potential for a sharp build in crude oil inventories," it said.
Upside risks for the market include the hurricane season in the Gulf of Mexico, which could disrupt production in the region, and colder winter weather that may boost demand for heating fuel, the report said.