OPEC sees 'significant' 2006 stockbuild at current output

London (Platts)--16Dec2005

OPEC expects a further "significant" rise in oil inventories in 2006
should members hold output near a 25-year high, the cartel said Friday, an
outlook that could support calls within the group for supply cuts next year.

     Demand for OPEC crude will average 28.7-mil b/d next year, 100,000 b/d
less than in 2005, OPEC said in its monthly report. The estimate is 300,000
b/d less than OPEC's initial forecast and implies a 1.3-mil b/d rise in stocks
should members keep producing at November's rate of 30-mil b/d. 

     "This downward revision suggests another potential significant
stock-build in 2006 if OPEC continues producing at current levels," the report
from OPEC's economists in Vienna said. 

     OPEC's outlook comes after the group Monday signaled it may cut output in
2006 to prop up prices after winter in the US, Europe and Japan, when demand
eases. Members have been pumping oil near full tilt in 2005 to allow consumers
to build up stocks and lower prices that hit a record $70.85/bbl in August. 

     Crude oil in New York was down 52 cts at $59.47/bbl at 1212 GMT. Prices
have fallen over $10/bbl from the record in August when Hurricane Katrina hit
rigs and refineries in the Gulf of Mexico. 

     DEMAND UP 'SLIGHTLY'

     OPEC also "slightly" raised a forecast for growth in global demand next
year because of a brighter outlook for the economy. The cartel expects
demand to expand by 1.6-mil b/d, up 70,000 b/d from a previous estimate.

     "The world economy enters 2006 in very good health," the report said.
"The US economy has proved resilient as consumers and businesses have coped
with the impact of the hurricanes."

     Even though OPEC expects demand for its crude to slow down next year, the
latest estimate is 130,000 b/d more than November's forecast.  

     OPEC still expects slower demand growth than some forecasters, such as
the International Energy Agency. The IEA, an adviser to 26 industrialized
countries, this week raised its 2006 estimate by 130,000 b/d to 1.79-mil b/d.

     Some OPEC officials have raised concern about a drop in prices in the
second quarter, when demand can fall sharply. OPEC expects demand for its oil
in the second quarter of 2006 to slip to 27.74-mil b/d, the report said.

     But the seasonal fall in demand has been smaller than expected in recent
years--a surge in 2004 led by China forced OPEC to pump more in that year's
second quarter. Hoping the trend will be clearer next year, OPEC oil ministers
plan to meet Jan 31 in Vienna to decide output levels for the spring.

     "During the typically low-consumption second quarter, the required demand
for OPEC oil is expected to fall," the report said. "However, the situation
requires careful monitoring as the markets have behaved uncharacteristically
during the same period over the past two years."

     In addition to a slowdown in demand for its crude, OPEC also forecasts
growth in supply from non-OPEC countries will gather pace next year after
disruptions caused by the hurricanes in the US Gulf cut supplies in 2005. 

     Non-OPEC supply will average 51.6-mil b/d next year, up 1.4-mil b/d from
2005 and little changed from last month, OPEC said. Non-OPEC producers pump
almost two-thirds of the world's supply.

     If realized, the growth rate in non-OPEC supply next year would be more
than three times faster than this year's expectation of 370,000 b/d.

			--Alex Lawler, alex_lawler@platts.com
			--Richard Swann, richard_swann@platts.com

     For more OPEC news, request a free trial to Platts Oilgram News at
http://www.platts.com/Request%20More%20Information/

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.