By Margaret McQuaile on June 10, 2010 1:11 PM

There is no room for additional oil on world markets, OPEC said this week, warning that supply growth has "more than overwhelmed" growth in demand.

The oil cartel has revised its forecast of demand for crude produced by its 12 members this year downward by 70,000 b/d to 28.77 million b/d, which means that the 29.28 million b/d Platts estimates it pumped in May a lot more oil than the market needs.

OPEC has become becoming increasingly relaxed about quota compliance, or rather the lack of it, as oil prices have settled into the $70-$80/barrel range recently described as "this ideal realm."

When Iraqi production of 2.45 million b/d is subtracted from the overall May figure, the latest Platts survey of OPEC and oil industry officials and analysts pegs supply from the 11 members bound by quotas at 26.83 million b/d, a figure that leaves the gap between estimated actual supply and OPEC-11 target at 1.99 million b/d

That's slightly smaller than the estimated 2.05 million b/d between April output from the OPEC-11 and their 24.845 million b/d official target, but it's smaller largely because Nigerian volumes--still vulnerable to outages linked to militant attacks on oil installations--took a 70,000 b/d tumble.

OPEC has given no indication that it may adjust the current OPEC-11 target, in place since January last year, to bring it closer to actual production when it next meets on October 14 in Vienna. By then, perhaps, it will be hoping that its projected demand level of 29.6 million b/d for its crude in the third quarter will have been realised and that it can expect this figure to edge up further to the 29.8 million b/d forecast for the fourth quarter.

Keep in mind, though, that OPEC sees demand for its crude in the current quarter averaging just 27.73 million b/d, which is 1.55 million b/d less than Platts' estimate of May production.

It's no surprise, therefore, that OPEC is more than a little concerned.

"Required OPEC crude is forecast to decline by 175,000 b/d from a year earlier, following two consecutive annual declines. The first quarter of the year is still showing a drop of 1.3 million b/d followed by a decline of 500,000 b/d in the second quarter, while both the third and the fourth quarters are estimated to see positive growth of around 400,000 b/d and 600,000 b/d respectively," it says in its latest monthly oil market report.

OPEC says a recent drop in oil prices to the low $70s/b "appears to reflect a shift in sentiment about the world economic recovery following the emergence of the sovereign debt crisis in the Euro zone and initial signs of moderation in the pace of economic growth in China, as the government seeks to prevent overheating."

This shift, along with a growing imbalance in supply/demand fundamentals, "highlights the need for an increasingly cautious approach when evaluating the market developments," it says.

The International Energy Agency reckons OPEC is set to increase output over the next two months, noting that Saudi Arabia, the UAE and Qatar have all offered more June and July crude to buyers in Asia, and that the group's Gulf producers typically ramp up wellhead production during the summer to meet increased need for electricity.

It may be, therefore, that the additional crude OPEC says the market does not have room for will come from its own members.