OPEC ups oil demand forecast

OPEC raises its oil demand forecast and price assumptions in its latest outlook.

NEW YORK (CNNMoney) -- OPEC now expects demand for oil to grow even more than it projected just a year ago, as the oil cartel said the recovery from the Great Recession took place faster than it expected.

But the group's annual oil outlook released Tuesday also worried about the risk of a new recession in the world's developed economies in the near-term due to threats such as the European debt crisis.

It also said it is now working with an assumption of oil prices about $85 to $95 a barrel over the rest of the decade, which is $10 a barrel higher than it was projecting just a year ago. But it stressed that price target is neither a forecast nor a statement of desired price levels.

The OPEC report said it is now clear the previous price assumption was too low given rising production costs and a higher break-even point for many oil producing nations.

Several oil analysts believe that major oil producers such as Saudi Arabia plan to ramp up social spending in reaction to the Arab Spring protests of earlier this year. They say that will force those countries to limit supply to maintain a higher price. The Saudis promised $130 billion in housing subsidies and other social spending this past spring.

Oil prices Tuesday closed at $96.74 a barrel, up $1.22. Prices have jumped nearly 13% in the last month as fears that the U.S. economy was at risk of another recession lessened.

The new forecast from OPEC calls for demand to rise to 92.9 million barrels a day by 2015, which is 1.9 million more than the estimate of a year ago.

"The Great Recession had enormous implications for projections in both the short- and medium-term," said the report. "However, the initial recovery was swifter than expected, although risks now appear rather skewed towards the downside given the widening global macroeconomic uncertainties."

The demand forecast from developed nations is a bit higher than OPEC's previous estimate, up by about 700,000 barrels a day. But most of the projected increased demand comes from developing countries.

Increased use of cars and rapid population and economic growth in the developing world is expected to drive demand significantly higher.

That in turn could mean much higher prices. OPEC now has a working assumption of oil at $133 a barrel by 2035. Last year the forecast only reached to 2030, and the price assumption for that year stood at $106 a barrel.