July 21 (Bloomberg) -- OPEC needs to raise oil production to reduce crude prices and help global economic growth, the Centre for Global Energy Studies said.

OPEC's forecast for 2008 supply increases from outside the group is unrealistic, the London-based consultant said in a monthly report today. World oil inventories fell for six consecutive quarters before rising in the second quarter of 2008, indicating a supply shortfall, the report said.

``OPEC's continued assertion that the world is well supplied with oil does not stand up to scrutiny,'' the report said. ``Not enough oil is being produced to meet world demand and this has been the case since the middle of 2006.''.

OPEC's prediction that non-OPEC production will increase by 560,000 barrels a day in 2008 compared with last year is a ``gross over-estimation,'' CGES said. Non-OPEC production was down around 330,000 barrels a day in the first half, according to the report.

The Organization of Petroleum Exporting Countries, supplier of 40 percent of the world's oil, must increase output to prevent record prices harming the world economy, the report said.

OPEC should sell so-called heavy grades of crude, which are difficult to process into fuel, at steeper discounts to benchmark prices to lure refiners, the report said. Saudi Arabia, which increased its discounts for heavy grades of crude until June, has cut the discounts for July and August, CGES said.

OPEC ``appears to be seeking the upper limit of the price of oil, irrespective of its impact on the global economy,'' the report said. The recent fall in oil prices may indicate that $150 is the limit, CGES said. Crude in New York has fallen 12 percent since reaching a record $147.27 a barrel on July 11.

Global crude oil inventories are ``sufficient,'' OPEC President Chakib Khelil said yesterday in a faxed statement, dismissing the need for the group to increase production.

To contact the reporter on this story: Maren Naess Olsen in London molsen10@bloomberg.net.

Last Updated: July 21, 2008 12:05 EDT