OPEC upgraded its forecast for 2016 oil demand growth on Wednesday, in a report that may dampen hopes for a deal on a production freeze at its meeting next month.
In its August report, OPEC forecast demand growth of 1.22 million barrels a day (mb/d) year on year, which was 30,000 barrels higher than forecast in July. The new forecast would put global oil demand across 2016 at 94.26 mb/d. OPEC, which represents 14 major oil-producing countries, attributed the upgrade to better-than-expected economic performance in advanced European economies and some Asian ones, including India, in the first half of the year.
It left its outlook for oil demand growth for 2017 unchanged. This would see total oil consumption at a new high of 95.41 mb/d next year.
The oil group's basket tracking the price of petroleum varieties produced by OPEC members declined for the first time in five months in July. It averaged $42.68 in July, down from $45.84 in June.
"After a significant recovery for five consecutive months from its lowest value in years, the ORB (OPEC Reference Basket) slipped nearly 7 percent in July, falling against a backdrop of less-than-anticipated demand, high stocks, particularly of refined products, and rising supply. Hedge funds have also turned more negative, contributing to further pressure on oil prices," OPEC said in its latest monthly report.
Light crude oil futures for September have declined by 18 percent to around $42.40 per barrel from a recent peak above $51 per barrel. They remain sharply below the highs above $100 reached before the massive rout took hold in July 2014.
OPEC held its world economic growth forecast unchanged at 3 percent for 2016, but cut its outlook for the U.S., following weak first-half growth there. It now sees the world's biggest economy growing by 1.7 percent this year.
It upped its outlook for Japanese economic growth to 0.9 percent in both 2016 and 2017, following the country's recently announced fiscal stimulus package.
It saw the major oil-producing countries of Brazil and Russia rebounding from recession in 2017 to grow by 0.4 percent and 0.7 percent respectively.
No change from OPEC next month?
The OPEC report came as hopes rise once again that the group will discuss a production freeze in September when it informally meets in Algeria. On Tuesday, Venezuelan President Nicolas Maduro said on state television that he had started talks with other OPEC members and Russia on stabilizing oil prices.
Oil markets rallied afterward, but skepticism is warranted when it comes to any hopes that OPEC will act to support oil prices, either by freezing overall production or by installing individual country output quotas, as some members would prefer.
OPEC meetings in April and June failed to produce any agreement or meaningful decisions on price-supporting moves. Instead, the group, led by Saudi Arabia, decided to continue its strategy of defending market share instead of price, despite the concerns of some members.
Emma Richards, senior oil and gas analyst at BMI Research, told CNBC on Wednesday that there was "understandable skepticism" surrounding the next OPEC meeting.
"I don't think OPEC is really signalling that (it is going to freeze production) and I think the market and media has overreacted and read more into it than what was meant to be signalled," Richards told CNBC Europe's "Squawk Box."
"I think what they're trying to do is softly, verbally intervene in the market to support prices going into the third quarter when on a fundamental basis it's starting to look a little bit weak again."
Production limits for member countries as proposed by Iran are unlikely to be introduced any time soon, Richards said.
"Saudi Arabia has made it very clear that they won't subscribe to anything like that unless you have all members on board," she said.
Richard Mallinson, a geopolitical analyst at Energy Aspects, told CNBC on Wednesday that OPEC members like Saudi Arabia were happy to stand pat on production.
"We've been through this several times before and it didn't come to anything in April, so the market is rightly going to be quite skeptical that it can deliver any real results this time, too," he told CNBC Europe's "Squawk Box."
"Saudi Arabia is still looking for the rebalancing that has been taking place to reach its conclusion, for prices to go back higher to help."