Nov. 8 (Bloomberg) -- Crude oil may rise 10 percent before the end of the year as OPEC enforces production cuts and demand from refiners rebounds after maintenance shutdowns, said Edward Morse, chief energy economist of Lehman Brothers.

Oil prices may increase to as much as $66 a barrel in the fourth quarter from about $59 now, Morse, who joined Lehman from Hess Energy Trading Co., said in an interview in Seoul. Next year, crude may average as much as $8 a barrel more than in 2006. So far this year, prices have averaged $67.10. Lehman is the fourth-largest U.S. securities firm.

The Organization of Petroleum Exporting Countries, producer of 40 percent of the world's oil, will be more disciplined than expected in implementing the reduction in output, Morse said. Oil has fallen 24 percent from a high of $78.40 a barrel on July 14 as refineries shut for maintenance ahead of winter, allowing crude stockpiles to gain.

``It may turn out some OPEC countries may regret the cuts'' for the lost revenue, Morse said during the Korea Oil and Gas Conference in Seoul. ``The price rise that will result from a rise in refinery demand for crude and a rapid rundown in crude stocks could overshoot the marketplace.''

Other analysts share Morse's view of rising fourth-quarter prices. West Texas Intermediate oil, the benchmark linked to New York's light, sweet crude contract, may climb as high as $65 a barrel, Fereidun Fesharaki, chief executive of FACTS Global Energy Inc., a consultant, said on Nov. 7.

Demand Gains

``Demand is starting to go up and OPEC is cutting production,'' Fesharaki said at the conference.

By 2008, a slowdown in non-OPEC supply growth to only 800,000 barrels a day may propel prices above $70, he said.

Prices will rise in 2007 because of increased demand and constraints in global refining and crude oil production, Lehman's Morse said. Prices may average as much as $74 a barrel next year.

``Global demand is unbelievably high and U.S. demand for light products has been tremendous,'' Morse said.

Demand in the U.S., the world's largest energy consumer, will climb 300,000 barrels a day. Consumption in China should grow 500,000 barrels a day, especially if the government follows through on plans to remove price controls on motor fuels that have reduced profitability at domestic refiners.

OPEC's Demand

Another 500,000 barrels a day of demand will come from oil- producing countries including Saudi Arabia, particularly OPEC members in the Middle East. Total global demand may grow as much as 1.8 million barrels a day next year.

OPEC agreed last month to cut its output by 1.2 million barrels a day starting in November to prop up oil prices. Analysts and traders have questioned whether the group will meet its new targets, with some estimating that the actual reduction won't exceed 500,000 barrels a day.

Morse sees OPEC slashing supplies by ``closer to 1 million than 500,000 barrels a day,'' led by Saudi Arabia and the other Middle East members. The organization's aim is to counter traders who have sold futures contracts aiming to profit from any decline in oil, or so-called short sellers. Previously, most speculators had bought contracts on expectations that oil would rise, known as long positions.

``The motivation is to punish speculators,'' Morse said. ``They want to make sure the shorts go long again.''

Global supplies will be stretched next year as demand growth outpaces supply, Morse said. Non-OPEC countries including Russia, Norway and Mexico are unlikely to produce more than 1 million barrels a day extra while OPEC will contribute little new output, he said.

To contact the reporters on this story: Christian Schmollinger in Seoul at christian.s@bloomberg.net; Nesa Subrahmaniyan in Seoul at at nesas@blooomberg.net.

Last Updated: November 7, 2006 19:39 EST