LONDON, May 13 (Reuters) - World oil demand is still shrinking as the global economy contracts, OPEC said on Wednesday, adding a recent rise in oil prices reflects sentiment rather than fundamentals, which are far from balanced.
The Organization of the Petroleum Exporting Countries said in its Monthly Oil Market Report demand would drop by 1.57 million barrels per day (bpd) in 2009 to average 84.03 million bpd. Its previous forecast was for demand to fall by 1.37 million bpd.
Despite the latest revision, OPEC still expects higher global oil demand than the International Energy Agency, adviser to industrialised countries, which last month forecast consumption this year at 83.4 million bpd.
Demand is falling fast in the developed nations of the Organisation for Economic Co-operation and Development (OECD), but the global downturn has also curbed previously rapid demand growth in developing countries such as China and India.
World oil demand contracted year-on-year by a record 2.4 million bpd in the first quarter of this year with about 95 percent of the total decline attributed to the OECD, OPEC said.
Oil prices hit a record high of almost $150 a barrel in July last year, supported by expectations of strong demand from the developing world, but then tumbled to lows beneath $35 in December as the global downturn took hold.
Oil prices have recovered since December and hit a six-month high above $60 per barrel on Tuesday on early signs the economic slowdown might not be as severe as previously thought.
But the OPEC report cautioned that the improvement in market sentiment did not necessarily reflect the realities of demand and supply.
"Prices have remained above $50 per barrel due more to market sentiment than fundamentals. Considerable risks remain as oil market fundamentals are far from balanced due to the persistent contraction in demand and growing supply overhang."
OPEC has promised to cut 4.2 million bpd, equal to about 5 percent of daily world demand, from its output levels since September to try to support prices.
The producer group, which pumps more than a third of the world's oil, held its output quotas steady when it last met in March, but will meet again on May 28 to reassess the market.
OPEC complied with 77 percent of its pledged supply cuts in April, versus 82 percent in March, according to Reuters calculations based on OPEC data.
The group said its production, excluding Iraq, was at 25.81 million bpd in April, up from 25.59 million bpd in March. (Reporting by Christopher Johnson; editing by James Jukwey)