By Margaret McQuaile & Richard Swann

July 15 - World oil markets are set to remain well supplied through 2011, thanks to brimming inventories and rising crude production capacity, oil producer club OPEC said July 15 as it forecast the first increase in demand for its crude in three years.

Publishing its first set of forecasts for 2011, OPEC said it expected demand for its on crude to rise by 180,000 b/d to 28.84 million b/d.

But that figure is below current OPEC production, which the group's Vienna secretariat, using secondary sources, estimates at 29.203 million b/d in June.

"The overall outlook indicates that the current stock overhang would be more than sufficient to supply the additional volumes needed in 2011. As a result, the oil market is set to remain well-supplied, especially in light of the ongoing increase in crude oil production capacity," OPEC said in its monthly oil market report.

The June production estimate is broadly unchanged from the revised May figure of 29.198 million b/d. Excluding Iraq, which does not participate in OPEC output pacts, the 11 members bound by quotas pumped 26.855 million b/d in June, 62,000 b/d more than the revised May figure of 26.793 million b/d and 2.01 million b/d more than their 24.845 million b/d target.

The estimates suggest that OPEC-11 achieved in June a compliance rate of just 52.1% with the 4.2 million b/d of output cuts agreed in late 2008 and which came into effect in January 2009.

But while forecasting higher demand for OPEC crude next year, OPEC lowered its forecast of this year's call by 100,000 b/d to 28.66 million b/d, saying it expected non-OPEC producers to account for more of the expected growth in global demand than it had projected a month ago.

OPEC now sees supply from independent producers at 51.86 million b/d in 2010, an upward revision of 80,000 b/d, and at 52.21 million b/d in 2011. The expected growth in non-OPEC supply next year is less than half the expected increase in 2010 of 740,000 b/d.

The growth in 2011 comes largely from Brazil, Canada, Azerbaijan, Colombia and Kazakhstan, offsetting continued declines from the mature oil provinces of Mexico, Norway and the UK.

Minor decline in Russia

Russia, currently the world's top oil producer, is expected to see a minor decline in output to 10.03 million b/d next year, down 20,000 b/d from 2010 levels.

Production of natural gas liquids and non-conventional oil from OPEC countries -- not counted by the group as part of its formal crude output agreements -- is expected to rise by 530,000 b/d next year to reach 5.36 million b/d, on top of growth of 490,000 b/d in 2010.

The growth in OPEC NGL output in 2011 is expected to come mainly from Iran, Nigeria, Qatar, Saudi Arabia and UAE.

World oil demand, meanwhile, is set to rise to 86.41 million b/d in 2011, up 1.05 million b/d or 1.2% from this year's expected average of 85.36 million b/d but little changed from the previous forecast a month ago, OPEC said.

As in 2010, almost all of the growth in demand next year is expected to come from non-OECD regions, particularly China, India, the Middle East and Latin America.

China alone is expected to account for 430,000 b/d of the increase as its demand rises to 9.08 million b/d next year from 8.65 million b/d in 2010.

The developed economies of the OECD are likely to see their combined demand rise marginally to 45.42 million b/d in 2011, up from 45.32 million b/d in 2010, according to OPEC.

OPEC's outlook for oil demand is based on assumed global economic growth in 2011 of 3.7%, down slightly from an estimated 3.8% in 2010 as government-led economic stimulus packages taper off.