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OPEC slices US growth forecasts, warns on budget gridlock

Thursday, 10 Oct 2013 | 7:10 AM ET
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The Organization of the Petroleum Exporting Countries (OPEC) trimmed its forecast for U.S. growth in 2013, warning that the ongoing budget impasse in Washington could damage the recovery.

The group cut its forecast from GDP growth of 1.7 percent to a 1.6 percent expansion for this year.

While there was a healthy momentum to the U.S. recovery in recent months, the government shutdown, now in its tenth day, "could hamper the U.S. recovery and, if left unresolved, could potentially impact the global economy."

Even an eventual resolution which postponed the discussion for a few months would merely prolong the uncertainty and could create another drag on the still fragile recovery, OPEC said.

The U.S. growth forecast for 2014 remained at 2.5 percent.

While U.S. political tensions have increased, OPEC said that the easing of global political problems had started to bring the average price of oil down. The price still rose for a fourth consecutive month in September.

World oil demand is still expected to average 89.7 million barrels per day for 2013, an increase of 800,000 from last year.

(Read more: OPEC sees higher demand, more oil pumping in 2013)

"An improvement in supply prospects from the Middle East and North Africa (MENA) region and Sudan, along with assurances by major suppliers and international oil agencies that the market was well-supplied, also dampened the upward pressure on crude oil prices," the report stated.

Oil supply is expected to continue to grow, with higher-than-expected supply from the U.S., Brazil, Kazakhstan, South Sudan and Sudan, while Syria, the U.K., Norway and Australia represent the steepest declines in oil supply as 2013 comes to a close.

(Read more: 'OPEC obsolete' if Keystone pipeline OK'd: Pickens)

OPEC's global growth forecast for 2013 and 2014 remain the same, 2.9 and 3.5 percent respectively, but there was a downgrade for India on top of its downgrade for the U.S.

India's 2013 and 2014 forecasts have been downgraded to 5 and 5.8 percent respectively.

(Read more: US shale oil threatens to derail OPEC's future: IEA)

Looking ahead to the winter season, OPEC said the oil market will vary, with the U.S.and Europe expected to remain stable, while Asia's contribution to growth in demand is expected to decelerate. That is mainly due to general demand reduction during the monsoon and the lessening of diesel subsidies in places like Indonesia and Malaysia.

"Despite the more positive outlook for the U.S. and Europe, global product markets are expected to come under pressure over the winter season. The combination of sluggish demand and increasing product supplies are likely to dampen margins, leading to lower refinery runs over this period."

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