World oil demand will be slow in the early part of 2010, stocks are high and there is plenty of unused capacity, Royal Dutch Shell's chief executive said on Thursday, suggesting downside risks for oil prices.

The cautious outlook suggests shell, which vies with BP as Europe's largest oil company by market value, expects little immediate help from the outside environment in boosting profit and follows similar comments from other industry leaders on the weak prospects for oil demand.

"My outlook for 2010, I would not call a rosy one," Shell CEO Peter Voser said at a news conference.

"I think you will see the demand being sluggish going into 2010.”

Opec's secretary general made similar remarks this week, seeing little real demand recovery until the third quarter.

The chief executive of BP, in a bold prediction, said he expected world demand to peak sometime after 2020.

Crude oil was trading above $76 a barrel on Thursday, up from near $33 at the end of 2008 when the organisation of the petroleum exporting countries (Opec) announced record production curbs to prop up prices as the recession hurt demand.

Those curbs, which Opec has left in place for more than a year, have been effective in supporting prices, but they leave the producer group with a large amount of unused capacity which is overhanging the market, Voser said.

"Oil inventories remain at high levels, and so the outlook for the 2010 oil price is uncertain, but it is likely that Opec will be managing against a downside for some time."

Many forecasters such as the international energy agency and Opec expect world oil demand to return to global growth in 2010 as the economy recovers. However, both agencies trimmed their demand forecasts slightly in January.

"I'm very cautious about 2010. The stimulus packages will have some GDP growth impact still in 2010, but we see the environment rather weak in 2010, it will take longer I think than expected," the Shell chief said.

He was speaking after Shell earlier on Thursday posted a 75 per cent fall in fourth-quarter profit to $1.18 billion, as the firm was punished for falling output and its focus on the depressed refining and natural gas businesses. – Reuters