Despite falling oil prices, the Organization of Petroleum Exporting Countries says that demand for its crude will be lower than previously expected, citing economic uncertainties and high inventories.
OPEC now says that fourth-quarter demand for OPEC crude, which is known as the call on OPEC, will average 28.69 million barrels per day, down from its previous forecast of 28.86 million bpd, according to its October report.
"Uncertainties about global economic prospects particularly in the USA, slowing demand growth, rebounding non-OPEC supply and high stock levels have triggered a strong bearish sentiment in the market," said the report.
"This has led to some concern that the downward momentum might persist, causing prices to overshoot and fall below levels justified by fundamentals," it added.
Oil prices this morning dipped back down to $58.35 a barrel, down 25.6 percent from a high of $78.40 per barrel in mid-July. OPEC President Edmund Daukoru labeled the price drop as "catastrophic," according to Reuters. A sustained 20 percent drop is considered a bear market.
The announcement comes as OPEC prepares to meet on Thursday to discuss a cut in production. The group has already agreed on a cut of 1 million bpd, but needs to discuss which countries will lose the revenue that comes with a price cut.
OPEC also cut its 2007 forecast for crude demand. The group says it expects demand to fall to 28.08 million bpd from its previous forecast of 28.72 million bpd. OPEC says non-OPEC crude supply will rise by 1.8 million bpd to average 53 million bpd.
OPEC maintained its 2007 outlook for demand growth, expecting the world to add 1.3 million more bpd to consumption. It cut the 2006 forecast by 100,000 bpd to 1 million bpd.
OPEC says the drop in demand will mainly come from Organization for Economic Cooperation and Development (OECD) countries or the developed world because of slowing economies whereas the developing countries, such as China and India, will continue to increase consumption, reports CNN Money.
"China and the Middle East will lead the world oil demand growth with 0.42 mb/d and 0.30 mb/d respectively," OPEC's report said.