The Organization of Petroleum Exporting Countries Tuesday forecast global crude oil demand would contract in 2009, dragged down by a "huge decline" in demand from recession-hit industrialized nations.
In its monthly oil market report for December, OPEC predicted world oil demand would average 85.7 million barrels a day in 2009, a decline of 150,000 barrels a day, or 0.2% on the year. In its November report, OPEC had said it expected demand to grow by 490,000 barrels a day next year.
The sluggish economies of the Organization for Economic Cooperation and Development are now expected to sharply curtail oil consumption, the December report said.
"The worsening world economy is expected to have a strong impact on oil demand next year, especially in the OECD countries...should the world economic situation show further deterioration and the winter prove to be warmer than expected, then oil demand might show a further decline," OPEC said.
The producer group estimated demand from OECD members would drop by an average of 1.3 million barrels a day in the first half of 2009 compared with the previous year as some economies fall deeper into recession.
"The growing imbalance in the oil market over the coming quarters will lead to a much higher overhang in inventories, if the global recession deepens," OPEC warned.
Demand for OPEC crude oil is expected to average 30.2 million barrels a day in 2009, a drop of 1.4 million barrels on the year.
The report's conclusions reflect OPEC's concern over market balances before it convenes a ministerial meeting in Oran, Algeria, Wednesday.
OPEC officials have sent strong signals indicating their preference to trim production and balance oversupplied markets ahead of the summit.
Saudi Arabian Oil Minister Ali Naimi - weighing in for the world's largest oil producer Tuesday - said OPEC would likely rein in oil output by around 2 million barrels a day.
The group produced 31.1 million barrels of crude a day in November.
In the report, OPEC said forward demand cover in the OECD - a key indicator of back-up crude oil supply - stood at 56.3 days of cover, or around four days over the five-year average.
Onshore stocks were also bolstered by 45 million barrels of crude oil currently being stored in oil tankers at sea, OPEC said.
Meanwhile, OPEC revised lower its expectations for non-OPEC supply growth in 2009. Non-OPEC production was pegged to grow 640,000 barrels a day next year, a downward revision of 100,000 barrels from November's report on lower expectations for the U.S., U.K, Mexico, Australia, Brazil, Russia and Azerbaijan.
At 1545 GMT, benchmark Nymex light, sweet crude oil futures for January delivery were trading 76 cents lower at $43.75 a barrel. Prices have fallen over 75% since touching a record $147.27 a barrel in mid-July.