The Organisation of Petroleum Exporting Countries (OPEC) now expects daily demand this year of 88.63 million barrels per day (bpd), down from its forecast a month ago of 88.76 million bpd, it said in its March monthly report.

This still represents growth compared to 2011 when demand was 87.77 million bpd, according to OPEC figures that were revised slightly downwards.

“The weak pace of growth in the OECD economies is negatively affecting oil demand and imposing a high range of uncertainty on potential consumption growth,” the report said.

“Although US economic data points toward a better performance, the situation in Europe along with higher oil prices has resulted in considerable uncertainties on the future oil demand for the remainder of the year.”

Geopolitical factors, most notably tensions over Iran’s nuclear programme and speculation of Israeli military action, sent OPEC’s reference basket oil price of 5.1 per cent higher in February to $117.48 per barrel.

The monthly average was the highest since April last year.
‘”Solid economic data in the United States and easing worries over the eurozone debt crisis, coupled with speculative activities in oil futures

markets, also served to push the price of crude higher’’ OPEC said.

The cartel’s 12 members account for about 30 per cent of global crude oil output.

Western powers have imposed a raft of economic sanctions on Tehran in a bid to halt its nuclear programme, which they suspect masks a drive to build weapons.

Tehran denies the charge, and has warned that it could close the Strait of Hormuz, a key transit route for global oil supplies if increased Western sanctions halt Iranian oil exports.

The Islamic republic is the world’s fifth-biggest oil exporter and the second biggest producer in OPEC.

On Tuesday EU foreign policy representative, Catherine Ashton, said on behalf Britain, China, France, Russia, the United States and Germany that they were ready to hold talks with Iran.

It remained to be agreed where and when the negotiations would be held. The previous talks broke down in Turkey in January 2011.

The possible resumption comes despite an apparent deadlock between the UN atomic agency and Iran over its nuclear programme — which world powers want to be central to the talks — after two visits to Tehran in January and February.

OPEC oil output has risen in March to its highest since October 2008 as higher supply from Iraq and further recovery in Libya’s production offset a drop in shipments from Iran, according to a Reuters survey.

Supply from the 12 members of the cartels has averaged 31.26 million barrels per day (bpd), up from 31.16 million bpd in February, the survey of sources at oil companies, OPEC officials and analysts found.

The survey found that exports from Iran were falling as some buyers stopped or scaled back purchases because of sanctions. Concern about Iranian supply has helped drive a 15 per cent rally in oil prices this year to $123 a barrel. LCOc1

OPEC is pumping far more than its official production target of 30 million bpd but oil prices have rallied and inventories have not increased. For some, that indicates demand may be stronger than expected.