OPEC said on Monday that uncertainty over oil demand and global economic recovery, along with price volatility, pose a major threat to the oil market and the cartel's output plans.
"Uncertainties pose massive investment risks for OPEC members," the Organisation of Petroleum Exporting Countries' research division director, Hasan Qabazard, told the 18th Middle East Petroleum and Gas Conference, which opened in Kuwait.
Qabazard said uncertainty about future oil demand puts the producers' cartel in a dilemma about investing tens of billions of dollars for production capacity increases to meet potential future rises in demand.
The future demand scenarios envisage sharp fluctuations, with demand for OPEC output estimated at between 29 million barrels per day (bpd) and 36 million bpd by 2020 depending on the oil market, Qabazard said.
"This would mean OPEC has to spend between $180 billion and $430 billion depending on growth in demand, a staggering difference of $250 billion," he said.
Qabazard said OPEC members, which account for about 40 per cent of world crude supplies, currently have spare capacity of six million bpd.
OPEC kingpin Saudi Arabia alone has around two-thirds of the spare capacity, while Kuwaiti Oil Minister Sheikh Ahmad Abdullah al-Sabah said on Monday his country has around one million bpd.
Earlier this month, OPEC held steady its forecast for modest growth in world demand this year, at 0.9 million bpd.
Qabazard said although the global oil market has been stable in recent weeks, a number of major risks remain.
"High unemployment rates, excess production capacity and high levels of (sovereign) debt" still raise question marks about the pace of the global economic recovery after the meltdown that sent oil prices crashing, he said.
He lashed out at speculation in the oil market, saying that "speculative activity has become a threat to oil market stability."
When demand uncertainty combines with price volatility "planning for OPEC becomes virtually impossible," he said.
Richard Jones, deputy executive director of the International Energy Agency (IEA), said complete stability in the oil market will not be achieved, but insisted that fossil fuels will continue to dominate the energy market for decades.
World demand for crude is forecast to rise from 86 million bpd in 2008 to as high as 91 million bpd in 2014, with the main increase expected to be met by OPEC since non-OPEC supply will contract from 2012, he said.