Oil Demand Fell in Dec. Amid Price Concerns

Global demand for crude oil fell last month, and OPEC’s effort to shore up oil prices threatens to choke off growth in an already fragile world economy, a respected industry survey said Friday.

Oil inventories in importing nations have risen but are still low, contributing to market instability and volatile prices, the International Energy Agency reported.

The IEA prepared its monthly oil report before the Organization of Petroleum Exporting Countries announced Wednesday that it would cut its oil output by 5%, or 1.5 million barrels a day. OPEC has defended its production cut by saying that an economic slowdown creates the risk that crude prices might collapse.

“It is one thing to raise prices in a booming economy, [but] it is another to do so in a period of economic slowdown,” the IEA said.

Crude prices shot up Friday, as oil markets digested the implications of OPEC’s production cut. Contracts of light, sweet crude for February delivery jumped $1.74 to $32.19 a barrel on the New York Mercantile Exchange.

The IEA is the energy arm of the Organization for Economic Cooperation and Development, which represents the interests of the world’s richest countries.

It generally argues for keeping oil prices cheap and supplies plentiful, and it criticized OPEC on Thursday for the cartel’s decision to curtail output for the first time since March 1999.

OPEC members meeting this week in Vienna said they would pump more oil to meet any unforeseen shortfall in supply.

In its report Friday, the IEA also unexpectedly revised downward its forecasts of oil demand.

Demand for the fourth quarter of last year and the first quarter of this year is 77.34 million barrels a day, it said, down 350,000 barrels from its forecast in last month’s report.

The agency now expects demand for all of 2001 to average 77.3 million barrels a day, 280,000 barrels less than it predicted in November.

Global crude production averaged 77.72 million barrels a day in December, down 1.34 million from November. The decrease resulted mainly from a plunge in output from OPEC member Iraq, which slashed its exports last month due to a dispute over pricing with the United Nations. The world body regulates all Iraqi exports.

OPEC’s actual output slipped to 27.86 million barrels a day in December, down from 29.54 million the month before.

Crude inventories grew by 1% in November. While this trend is positive, inventory levels are still low overall, the IEA said.