Report offers fresh viewpoint on world oil market after surprise cuts in output

The Organization of Petroleum Exporting Countries, or OPEC, cited economic risks to summer oil demand but maintained its forecast for global oil demand growth in its monthly report released on Thursday.

The report offers a fresh viewpoint on the world oil market after the group and its allies announced a surprise output cut earlier this month.

OPEC said demand could take a hit from any economic weakness due to interest rate hikes, reported Reuters news agency.

"It should be noted that potential challenges to global economic development include high inflation, monetary tightening, stability of financial markets, and high sovereign, corporate, and private debt levels,"OPEC said.

"OECD commercial inventories have been building in recent months, and product balances are less tight than seen at the same time a year ago."

It said demand will rise by 2.32 million barrels per day, or 2.3 percent, which is unchanged from last month's forecast.

Earlier this month, Saudi Arabia and other OPEC+ oil producers announced oil output cuts of around 1.16 million barrels per day, in a move that analysts said would cause an immediate surge in prices and the United States called "inadvisable".

The move brought the total volume of cuts by OPEC+, which groups OPEC nations with Russia and other allies, to 3.66 million barrels per day, or 3.7 percent of global demand, according to Reuters.

Oil prices had fallen in March toward $70 a barrel, the lowest in 15 months, due to concern that a global banking crisis would hit demand, said analysts. The further output cuts had not been expected after crude recovered toward$80.

On Wednesday, Fatih Birol, head of the International Energy Agency, described the cutbacks as a "bad surprise", reported Bloomberg.

Crude oil prices rose by 2 percent on Wednesday to$87, the highest in more than a month. Industry news websites reported oil prices were stable on Thursday as the market measured the possibility of limited supply against possible recession in the United States, the world's largest oil consumer. High energy prices have been a major driver of inflation.

The International Energy Agency has indicated the output cuts would tighten supply in the second half of the year and push oil prices higher still.

The International Monetary Fund warned on Tuesday that a severe flare-up of financial system turmoil could slash growth to near recessionary levels.

It said that for every 10-percent rise in the price of oil, its models show a 0.1 percentage point reduction in economic growth and a 0.3 percentage point increase in inflation.

"With the recent increase in financial market volatility, the fog around the world economic outlook has thickened," the IMF added.