China and Middle East will drive oil demand: OPEC

Almost half of this year's oil demand growth is likely to come from China and the Middle East, the Organization of the Petroleum Exporting Countries (OPEC) said Monday.

In its monthly report, Opec forecast that global oil demand growth would increase by an average 1.17 million barrels a day to 92.37 million barrels a day, little changed from estimates made in February, as the recent slide in oil prices supports consumption.

Oil Iraq OPEC
Atef Hassan | Reuters

It also left forecasts for 2015 world demand for its crude virtually unchanged at about 29.2 million barrels per day.

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"While many challenges remain, the expected improvement in the global economy will also result in higher oil demand growth of 1.2 million barrels per day, above last year's increase of 1.0 million barrels per day," the Opec report said.

"Given that the bulk of the increment will be coming from the emerging economies, any positive developments in these countries can add to oil demand growth," it added.

Still, OPEC revised down its forecasts for growth in Russia – which has been hit hard by weakness in the rouble and Western sanctions for Moscow's intervention in Ukraine – and Brazil.

It estimated Russia's economy would contract 3.2 percent in 2015 compared with a previous forecast of a 2.4 percent contraction.

Oil prices, which have fallen sharply since last June, have stabilised in recent weeks—partly as weak prices help boost consumption.

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Brent crude oil was trading at around $54 a barrel on Monday, about 13 percent above lows seen in January but still almost 50 percent below where it traded last June above $110 per barrel. U.S crude prices fell to about $43.57 Monday, their lowest level since March 2009, before recovering to about $44.35.

At its last meeting in November, OPEC kept its output steady in the face of falling prices in a bid to slow oil production in the U.S. driven by a boom in shale oil.

In its report, OPEC said that U.S. oil production could take a hit later in the year in a sign that the dive in oil prices could take some time to impact the production of shale oil.

"As drilling subsides due to high costs and a potentially sustained low oil price, a drop in production can be expected to follow, possibly by late 2015," Opec said.

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