OPEC slashes oil demand forecasts

Demand for oil is expected to shrink next year as the price of the commodity fell to its lowest level in over a year.

The price of a barrel of Brent North Sea crude oil for delivery next month fell 79 cents to $73.74, its lowest level since September 2007.

In anticipation of a recession in the major economies, the price of oil has been driven down over the last few weeks.

The Organisation of Petroleum Exporting Countries (OPEC) has slashed its 2009 forecast by 100,000 barrels to 87.2 million barrels per day, in response to the falls.

The organisation has also cut its forecast for 2008, revising down oil demand by 330,000 barrels per day to an average of 86.5 million barrels per day.

"The ongoing downward trend in crude oil prices reflects the dramatically worsening conditions in global financial markets in recent weeks and their negative impact on the real economy, as well as the decline in the demand for oil," OPEC said in its monthly report.

However, the group warned: "Even if governments are successful in calming equity markets and unfreezing credit markets in the near future, the fallout on the real economy from the financial market headwinds is expected to be considerable."

The drop in demand is led by the US, where economic turmoil has undermined demand for all petroleum products so far this year, OPEC said.

September gasoline demand in North America declined by 4.7 per cent, as higher prices led to American motorists cutting their driven mileage by 62.6 billion miles year-on-year in the first nine months of 2008.