Subprime mortgage crisis may affect oil demand

OPEC (the Organisation of the Petroleum Exporting Countries) has warned that a sluggish US economy and fallout from the subprime mortgage crisis could cut oil consumption for the remainder of the year.

In its August Monthly Oil Market Report, OPEC repeated its view that major consumers have enough crude stocks, despite calls for more oil. The report is OPEC’s last before it meets in mid September to set supply policy.

OPEC remarked that oil has dropped to around $72 a barrel in New York from an all-time high of $78.77 reached on 1st August because of worries that worsening credit conditions and a slowdown in the USA could take a wider economic toll.

World consumption will increase by 1.3 million barrels per day in 2007, a slight increase from the previous forecast due to demand from Japanese power plants.

OPEC commented that with OECD (Organisation for Economic Co-operation and Development) total crude oil stocks at decade-highs and US inventories at good levels, crude oil stocks are adequate to meet the forecast demand levels.