Opec, the cartel that produces 40 per cent of the world’s oil, today admitted that it expects demand for crude to fall next year and has cut its forecast by 60,000 barrels a day.

In its latest quarterly report, the 13-country cartel reduced its forecast for the third time this year on the basis that the slowing global economy and the high price of oil will continue to dampen demand during 2008.

Last week, oil surged to a record $139 a barrel, and the UK Treasury said yesterday that prices could rise to $180 per barrel next year. Opec maintained its view that the rising price of oil is because of speculation in the market and not lack of supply.

However, a Treasury report warned that world oil production would need to increase by 14 per cent - or 12 million barrels per day, from 86 million currently, "to avoid a supply crunch" by 2015.

The Treasury said high oil prices were being driven chiefly by soaring demand and weak supply rather than by speculation, although it said it was seeking greater transparency in the oil market to help reduce volatility.

The report on global commodities laid out a bleak picture for the future of global energy prices, pointing out that huge investments will be needed to avoid a supply crunch over the next few years.

It said there was "considerable uncertainty" surrounding the likely future direction of oil prices, but pointed out that they could be driven higher by factors "including the risk of short-term supply disruptions, such as from the hurricane season on production in the Gulf of Mexico and delays in major new oil production projects".

Independent forecasts used by the Treasury indicate that prices could rise to $180 by September 2009 although its core forecast was for a stabilisation or slight drop from current levels of around $135 per barrel.

It saw no likelihood that prices could drop below $80 per barrel.

The report emerged as figures from the Federation of Small Businesses (FSB) showed that rising fuel costs are having a dramatic effect on the UK economy by stifling growth and employment.

In an FSB poll of more than 9,000 small business owners, nearly 40 per cent said that fuel costs would make it likely that they will have to cut staff over the next 12 months.

More than 80 per cent said that fuel costs are likely to make it more difficult for them to expand their business and hire more staff in the next 12 months.

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