UPI Energy Watch

OPEC cuts estimate of growth in world oil demand for 2008

High prices and slower economic growth in industrialized and Western countries led the Paris-based International Energy Agency to cut its estimates for demand, but the Organization of Petroleum Exporting Countries put its estimate even lower.

Global oil demand is now projected to grow by 1.35 percent in 2008, compared with the previous estimate of 1.4 percent, according to OPEC's monthly report for May.

Because of its projected slowdown in demand, OPEC has repeatedly refused to increase production.

"World oil demand growth in 2008 is forecast at 1.2 million barrels per day to average 86.95 million barrels per day, representing a minor downward revision from last month," the report said.

While demand in industrialized countries has dropped since the beginning of the year, demand in developing countries has continued to grow as their economies grow and they build supply reserves, though demand in China was interrupted this week because of the earthquake.

OPEC said that the warm winter was part of the reason for the slow demand early in the year and, with winter ending in the Northern Hemisphere, "Oil demand growth will follow a slow consumption cycle in the second quarter," the group said.

The United Arab Emirates' crude oil output increased last month

Production in the UAE rose 4.33 percent to 2.65 million barrels per day in April as maintenance-related outages at some of the oil-producing fields were resolved, the Paris-based International Energy Agency said in its latest oil market report.

The UAE produced about 2.54 million barrels per day of crude oil in March, Gulf News reported.

The IEA said the "effective spare capacity of the Organization of Petroleum Exporting Countries on a wellhead basis is believed to be around 2.3 million barrels per day, with Saudi Arabia and the UAE holding the bulk of this."

The UAE is predicted to have a sustainable oil production capacity of 2.88 million barrels per day, though the nation's capacity at the end of 2008 was estimated at 2.85 million barrels per day.

While OPEC has not agreed to increase its production, some individual member nations have done it on their own.

The combined oil production by all 13 OPEC member countries averaged 31.87 million barrels per day in April, about 0.81 percent lower than the group's March output of 32.13 million barrels per day, according to the IEA report.

Philippine government may cut taxes on oil and gas

Though prices dropped slightly this week, record-high increases since the beginning of the year have led the Philippine government to study proposals to at least temporarily suspend the Expanded Value-Added Tax on oil and royalties on natural gas, Executive Secretary Eduardo R. Ermita said.

Ermita said Department of Finance Secretary Margarito B. Teves is conducting a study on proposals to remove the EVAT to reduce electricity rates. The results of the study will help to determine the government's position on the proposals, the Manila Bulletin reported.

Part of the study will look at sources of additional revenues in the case that the EVAT is lifted or if a similar bill to decrease tax revenues is passed.

Lawmakers have proposed the lifting of EVAT on oil, and the royalties on natural gas, to reduce the electricity rates charged by the Manila Electric Co. to its subscribers.

If the EVAT on oil is suspended, it will result in savings of $1.40 to $1.47 on each 11-kilogram tank of LPG. On other oil products, it will result in savings of 11 cents per liter of diesel and 13 cents per liter of gasoline.

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Closing oil prices, May 15, 3 p.m. London

Brent crude oil: $122.03

West Texas Intermediate crude oil: $125.12

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(e-mail: energy@upi.com)