By Stephen Voss

Sept. 15 (Bloomberg) -- OPEC, which pumps 40 percent of the world's oil, lowered its forecast for fourth-quarter and 2006 demand, citing a slowdown in the world's largest economies.

The Organization of Petroleum Exporting Countries cut its outlook for fourth-quarter world demand to 85.6 million barrels a day, down 300,000 barrels a day from its previous forecast a month ago. OPEC also reduced demand forecasts for the current quarter, and for 2007, according to an e-mailed monthly report today.

``The slowing economy along with high oil prices has impacted oil demand growth, leading to a downward revision'' of North American 2006 demand of 100,000 barrels a day, the report from the OPEC secretariat in Vienna said. ``The summer peak for gasoline was not as strong as expected.''

Oil intensity, or the amount of crude used to produce a unit of economic output, will probably continue to decline as a result of high prices, the group's report said. OPEC this week decided to maintain its current oil production target, as analysts expected. The organization hasn't changed the quota for more than a year as oil prices rose to record levels above $78 a barrel this summer.

``In the long run, strong prices may intensify the downward trend in intensities by accelerating oil-saving and substitution effects,'' the group said in the report. Substitutions include power generators using natural gas rather than fuel oil.

The producer group cut estimates for 2006 and 2007 world demand by 100,000 barrels a day. It still expects world consumption to increase by 1.5 percent or 1.3 million barrels a day next year, which is similar to the current production of Algeria.

OPEC Production

OPEC's 11 member nations pumped 29.789 million barrels of crude a day in August, up 90,400 barrels a day from July mainly because of an increase in Venezuela, the report said, citing its survey of ``secondary sources,'' which include estimates by news agencies and analysts.

Excluding Iraq, which was no quota, the other 10 members pumped 27.73 million barrels a day, which was close to the collective target of 28 million barrels.

Supply from non-OPEC countries was forecast at 55.4 million barrels a day for 2006 and 57.5 million barrels a day for 2007, unchanged from OPEC's previous estimate.

``One of the issues we have is that non-OPEC supply is going to increase very much next year,'' Iranian Oil Minister Kazem Vaziri-Hamaneh told reporters in Vienna on Sept. 12.

The changes in the world demand forecast led to corresponding revisions to OPEC's estimate of the demand for its crude oil, which was lowered by 300,000 barrels a day for the fourth quarter, to 28.9 million barrels a day, OPEC's monthly report showed. The so-called ``call on OPEC'' crude was lowered by 200,000 barrels a day for both 2006 and 2007.

Reflecting seasonal changes in world demand and a gradual rise in supply from outside the exporter group, the calculated demand for OPEC crude is expected to peak at 29.2 million barrels a day in the first quarter of 2007, before dropping to 27 million barrels a day in the second quarter.

To contact the reporter on this story: Stephen Voss in London at sev@bloomberg.net

Last Updated: September 15, 2006 08:19 EDT