World oil demand in the fourth quarter is expected to be 2 million barrels a day higher compared to levels a year earlier, but future oil use could be less if the global economy slows, the U.S. government's top energy forecasting agency warned on Tuesday.
World oil consumption should average 87.5 million barrels a day in the upcoming October-December period, the U.S. Energy Information Administration said in its monthly energy forecast.
The Energy Department's analytical arm said its forecast as based on relatively strong world annual economic growth of 3.5 percent and 2.3 percent for the United States over 18 months beginning in July.
However there are fears the economy may not be that strong because of the problems with defaulting subprime home loans and tighter lending standards in the U.S. mortgage market.
"To the extent that the recent turmoil in credit markets leads to markedly weaker world economic growth, energy demand would decline," the EIA said.
"Weaker energy demand would result in lower energy consumption, lower energy prices, or both, depending on the production responses of OPEC member countries," the agency said.
OPEC oil ministers meeting in Vienna, Austria on Tuesday agreed to ramp up the group's oil production by 500,000 barrels per day beginning on Nov. 1.
The group noted in particular the "ongoing tightness" in U.S. inventories of refined petroleum products such as gasoline and expected strong demand for heating oil this winter.
The Bush administration had urged OPEC to pump for oil, especially with U.S. gasoline stocks able to meet less than 20 days of motor fuel demand, the lowest supply-demand ratio ever recorded by the government.
In its monthly forecast, the EIA said it expected U.S. gasoline inventories at the end of the September to total 196 million barrels, up from 191.1 million barrels at the end of August.
Gasoline inventories at the end of the fourth quarter on Dec. 31 were forecast to be 206 million barrels. Even though motor fuel stocks will be higher than current levels, they will still be lower than inventories normally seen for that time of the year.
"Motor gasoline inventories throughout this summer were tight and are expected to remain so during the rest of the year," the EIA said.
Separately, distillate fuel inventories, which include heating oil, are expected this winter to remain near the previous five-year average for the heating season, the agency said.
"However, if refiners produce more gasoline than expected over the next few months to rebuild the very low gasoline inventories, this could reduce the expected build in distillate inventories" for the winter, the EIA warned.