World oil demand will contract more than expected this year and the weakening economy may further erode consumption, Opec said , building a case for additional supply cuts.

In a monthly report, Opec said it expected demand to fall by 180,000 barrels per day (bpd) this year, 30,000 bpd more than its previous forecast. Oil use declined last year, the first drop in more than 20 years, The trend is likely to continue this year.

'The considerable uncertainty about the course of the recovery implies the potential for further deterioration in world oil demand growth this year,' said the report, which is written by Opec economists.

The revision comes in response to mounting evidence that the world economy is far weaker than previously thought, undermining oil demand and prices. Oil has slid to around $38 a barrel from a record high of $147.27 struck in July.

Still, Opec's prediction of falling demand is less severe than that of the US government's Energy Information Administration, which said consumption would drop by 810,000 bpd this year.

Opec has agreed at meetings since September to cut its oil output by 4.2 million bpd, equal to five per cent of daily world demand, to combat the slump. It will take time for the measures to have an impact, the report said.

'However, it is essential that crude oil prices return to levels sufficient to encourage timely and adequate investment to meet the expected future demand growth,' it added.

With the latest revision, the Opec has slashed its demand forecast for the year by more than 1m bpd since its first prediction in June last year.

Some in the 12-member group, which pumps two in every five barrels of oil, say they are going even further than the agreed supply curbs.

Saudi Arabian oil minister Ali Al Naimi confirmed that the world's top exporter was pumping 8m bpd, in line with its Opec target, from January 1 and would reduce production further next month.

Other members, such as Venezuela and Qatar, have said this week that Opec may decide to reduce supply further. Its oil ministers are next scheduled to meet to set policy on March 15.

In the report, Opec slightly lowered its prediction for supply from producers outside the group.

Non-Opec countries are expected to pump 51.15m bpd this year, up 580,000 bpd from last year and down 70,000 bpd from the previous forecast.

Opec forecast demand for its crude oil would average 29.48m bpd in the current year, down 1.4m bpd from last year.

That compares with production, plus that of Indonesia which left Opec at the end of last year, of 30.3m bpd last month, down 830,000 bpd from November as supply curbs take effect. -Reuters