World oil demand will increase more than expected in 2014, OPEC said on Wednesday, raising its prediction for a second straight month as economic growth picks up in Europe and the United States.
The view on oil demand growth from the Organization of the Petroleum Exporting Countries, source of a third of the world’s oil, contrasts with that of the U.S. government’s Energy Information Administration, which on Tuesday cut its forecast.
In a monthly report, OPEC said global demand will rise by 1.14 million barrels per day (bpd) this year, up 50,000 bpd from its previous forecast. It also raised the 2014 projection for global demand for OPEC’s crude.
“While many challenges remain, the expected improvement in the global economy is also resulting in higher oil demand,” said the report from OPEC’s Vienna headquarters.
OPEC cited further signs of strong oil demand in the world’s top consumer, the United States, as well as a stabilising rate of demand contraction in Europe – where oil use has been held back for years by weak economies.
But the group also sees an increasing chance of slowdown in emerging economies – the source of much of the world’s oil demand growth. Concern over China was weighing on currencies closely linked to commodities on Wednesday.
“This rising risk of a slowdown in growth in the emerging economies has been mirrored in the foreign exchange markets in recent months,” OPEC said. “Recent developments in Ukraine have added to this year’s growth risk.”
According to secondary sources cited by the report, OPEC raised its own output to 30.12 million bpd in February, as a ramp-up in Iraqi exports outweighed disruption to Libyan shipments and lower Saudi Arabian output.
The stronger global demand outlook is leading to slightly higher demand for OPEC oil in 2014. OPEC expects the demand for crude pumped by its 12 members to average 29.70 million bpd, up 100,000 bpd from last month’s report.
While OPEC will welcome signs of higher demand for its crude, its market share is still under pressure from rising supplies of non-OPEC oil, such as U.S. shale. OPEC’s 2014 supply and demand figures point to a 420,00 bpd build-up in global inventories should OPEC keep pumping at February’s rate.
Following the reports from the EIA and OPEC, a third closely watched update on supply and demand is due on Friday from the the International Energy Agency.