The global economy is faltering and recovery is slowing, as was seen last week with plummeting stocks and falling oil prices.
On Tuesday, the Organization of the Petroleum Exporting Countries issued a report that cut the demand forecast for the rest of 2011 and 2012.
Though OPEC still expects oil demand to rise over the course of this year and into next, demand is not expected to be as high as initially determined.
OPEC cut this year’s demand forecast by 150,000 barrels per day, and for next year it was cut by 20,000 barrels.
Developing nations such as China, which in the past have created a strong demand for oil, have seen slips in oil demand rates as, according to the Wall Street Journal, China factory growth hit a 28-month low this June.
Oil prices dropped on Tuesday as well.
These dips have been a result of lower-than-usual demand, which is normally at a high during the summer months in the United States when driving hits its peak.
“Dark clouds over the economy are already impacting the market’s direction,” OPEC has been reported saying.
And yet despite this cut in the forecast, OPEC still believes that demand will continue to increase, albeit slower than originally expected.
For the rest of this year, OPEC’s report stated, oil demand is expected to increase by 1.2 million, or 1.4%, to 88 million barrels per day.
For 2012, it is due to increase again by 1.3 million barrels to 89 million barrels per day, an increase of 1.5%.
The Energy Information Administration (EIA) also cut its forecast on Tuesday for oil output from non-OPEC nations.
The EIA forecast was down 10,000 barrels for the remainder of this year to 52.28 million barrels per day for non-OPEC oil output.
However, the EIA also raised its forecast for non-OPEC output for 2012 to 53.08, up 50,000 barrels, reported Reuters.
The slip in demand has hurt Saudi Arabia’s argument for increasing OPEC output after the June OPEC meeting, an argument that Iran had firmly opposed.
But we can take comfort in the fact that demand is expected to rise. Though it may not occur as quickly as originally thought, a demand increase will mean the global economy is still functioning.
That’s all for now,