–2011 Demand Growth Forecast Now +1.2m b/d Vs +1.36m b/d Previous Est.
–Projects US Economy To Grow by 1.8% In 2011 Vs 2.5% Previous Estimate

WASHINGTON (MNI) – The following is the first part of excerpts from
OPEC’s Monthly Oil Market Report for August released Tuesday:

2011 World Oil Demand Outlook

Economic worries have affected oil demand in the OECD, leading to a
decline in the summer driving season. High retail prices have also done
their share in suppressing demand, mainly in the OECD region, and the
impact has been felt in China and India as well. These two factors were
mentioned in the beginning of the year in our MOMR as downward risk
possibilities. Should the situation see further deterioration in the US,
then aggregate oil demand will see a further decline this year. Chinese
oil demand has been keeping the situation in a semi-balanced trend;
however, recent weakening led to a decline in total oil demand. Chinese
oil demand has been in the growing mode in the first half of the year
despite the government’s efforts to curb it. Along with China, other
non-OECD countries are increasing the use of oil, offsetting the decline
in the OECD region.

Although there are some signs indicating a weakening oil demand
world-wide, it is too early to adjust the existing forecast for world
oil demand as risks are nearly balanced with regard to upward and
downward movements. The current situation in the weakening US summer
driving season is affecting total world oil demand toward a downward
revision by 0.15 mb/d. Hence, world oil demand is forecast to grow by
1.2 mb/d in 2011, averaging 88.1 mb/d.

—

Slower Global Expansion Leads To Downward Revision In Oil Demand
Growth

The slower expansion of the global economy and trade, particularly
in the US and other OECD countries, has resulted in a downward revision
in oil demand growth. The increase in world oil demand for this year has
been lowered by 0.15 mb/d to stand at 1.2 mb/d. Expected higher demand
in the US during the peak driving season has not materialized, and
gasoline consumption in July decreased while the decline in total
products reached nearly 0.5 mb/d versus a year ago. OECD oil demand is
now forecast to continue its contraction after a temporary rebound last
year. The fall in Chinese apparent oil demand in June, for the first
time in eight months, also confirms a weakening of manufacturing
activities worldwide.

Much deeper uncertainties and increasing risks to real growth are
indications of a more prolonged economic recovery period than earlier
anticipated. Crude oil production of the OPEC Member Countries has
surpassed 30 mb/d in July, the highest so far this year, and markets at
present are benefitting from sufficient oil supply. However, dark clouds
over the economy are already impacting the market’s direction, and the
potential for a consequent deterioration in market stability requires
higher vigilance and close monitoring of developments over the coming
months.

—

2012 World Oil Demand Growth Outlook

Although the world economic picture is facing increasing
uncertainties in 2011, world GDP for next year is forecast at a slightly
higher base than this year. Despite the enhanced economic outlook in the
OECD, it is forecast that next year’s oil demand growth will take place
in the non-OECD, mainly China, India, the Middle East and Latin America.
By sector, industrial and transport sectors will contribute the most to
expected oil demand growth. Petrochemical activities are expected to
push oil demand up next year in the non-OECD region. The US oil demand,
which is the main player in this year’s world oil demand, is expected to
be back in its normal growing mode; however it will remain the wild card
for 2012 as it could also be negatively influenced by the country’s
economic turbulence, state policies and retail petroleum product prices.
World oil demand is forecast to continue its growth during 2012 to reach
1.3 mb/d y-o-y, to average 89.4 mb/d, only a minor downward revision of
19 tb/d from the previous report.

Chinese oil demand is expected to grow the most world-wide, despite
the government’s efforts to curb energy use within the country. Chinese
oil demand is expected to inch up by 5.4% y-o-y. Along with China, the
Middle East, India, Brazil, and the rest of the non-OECD countries will
boost world oil demand up by 1.3 mb/d in 2012.

Next year’s oil demand forecast is based on assumptions such as
higher GDP, higher oil prices, strong Chinese economy, and uncertainty
in total world economy in 2011. Next year’s oil demand forecast implies
two scenarios; however the probability varies between the upper and
lower range. A better-than-expected outcome of the US economy might
boost world oil demand growth up by 0.2 mb/d y-o-y. On the other hand,
the gloomy picture which would be supported by higher oil prices and
further turbulence in oil markets might shave 15% off the forecast
growth.

—

World Economic Growth Outlook

World economic growth has been revised down to 3.7% in 2011 and to
4.0% in 2012. This was mainly due to revisions in the US forecast, which
was cut to 1.8% from 2.5% in 2011 and to 2.3% from 2.9% in 2012. The
forecast for Japan and the Euro-zone remained unchanged in 2011 at minus
0.8% and 2.0% respectively. Japan’s forecast for 2012 remained at 2.5%,
while the Eurozone’s forecast was changed to 1.4% from 1.5% previously.
Developing Asian countries continue to be the main drivers of growth.
The forecasts for China remain unchanged at 9.0% in 2011 and 8.5% in
2012. India’s forecast for 2011 was revised down from 8.1% to 7.9%,
while the forecast for 2012 was unchanged at 7.7%.

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** Market News International Washington Bureau: 202-371-2121 **

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