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OPEC says it pumped more oil in May, cuts world demand forecast

The 11 OPEC members bound by production quotas, which exclude Iraq, pumped 25.903 million barrels a day in May, an increase of 118,800 barrels a…

The 11 OPEC members bound by production quotas, which exclude Iraq, pumped 25.903 million barrels a day in May, an increase of 118,800 barrels a day from April, the Vienna-based organization said in its monthly oil report yesterday, citing secondary sources that include estimates from analysts and news organizations.

Oil’s 42 percent rally since April has encouraged some OPEC members to backtrack on record output cuts announced through the end of last year after prices slumped. OPEC pledged to adhere with targets more closely at a meeting in Vienna on May 28 as world demand shrinks. Angola, Venezuela and Nigeria increased output the most in May, the report said.

“In light of the considerable challenges the world economy and commodity market, particularly the oil market, have undergone, the worst appears to be behind us,” the secretariat said in its report. “Prices have not only remained steady, but have even moved higher.”

OPEC, which supplies about 40 percent of the world’s oil, implemented 75 percent of planned output cuts of 4.2 million barrels a day, compared with 77 percent in April, based on data in the report. The International Energy Agency yesterday said the producer group complied with 74 percent of the reductions.  Oil traded above $73 a barrel yesterday for the first time in seven months on increasing optimism about an economic recovery and as a weaker dollar encouraged investment in commodities. Confidence in the world economy rose for a third month as U.S. job losses slowed and global production improved, a Bloomberg survey of users showed this week.

The benchmark crude price used by OPEC, derived from the cost of oil produced by each of its 12 members, averaged $56.98 in May, about 14 percent higher than April, and was at $70.87 yesterday, OPEC said in its report today. That’s the highest average in seven months.

The 12 OPEC members, including Iraq, pumped 28.271 million barrels a day last month, compared with 28.136 million barrels a day in April, according to the report. As the global economy stabilizes, OPEC said it is expecting the decline in oil demand to slow. The group forecasts that consumption will shrink by 1.89 percent this year, or 1.62 million barrels a day, to 83.8 million barrels a day. Last month, it estimated global demand would shrink 1.83 percent, or 1.57 million barrels a day to 84.03 million barrels.

“World oil demand appears to be settling down,” the secretariat said in the report. “Industrial production activities are steadying and in some parts of the world have even improved slightly.”

The IEA raised its global oil-demand forecast for the first time in 10 months yesterday on signs that the economic slowdown is abating. The adviser to 28 nations increased its global oil demand estimate for this year by 120,000 barrels a day to 83.3 million barrels a day.

OPEC reduced the forecast for demand for its crude as global consumption shrinks. The group estimates it will need to produce 28.6 million barrels a day in 2009 to balance global supply and demand, 2.2 million barrels a day less than last year. Last month it estimated that it would need to pump 28.8 million barrels a day.  (AP)