Oil prices will remain high until the end of the year, with Brent expected to average 31 dollars a barrel in the fourth quarter, according to the latest survey from the London-based Centre for Global Energy Studies (GCES) published Monday.
However, it predicted that, once winter is over in the northern hemisphere, there will be a relatively steep price fall unless oil production levels are cut.
Looking ahead to the next ministerial conference of the Organisation of Petroleum Exporting Countries (OPEC) in Vienna on September 10, the centre said that, even if the producers' body decides to raise output to try to stabilise prices, the impact on the market over the winter months would be "modest".
"A 0.5 million barrels per day increase in OPEC's production with effect from October would do no more than prevent oil prices from rising further."
On balance the survey suggested there would be a small production increase, saying: "It is difficult to believe that in an election year, the US will not persuade its main allies in the Gulf (Saudi Arabia) to open the taps one more time."
On the other hand, it wrote: "Given the determination of some within OPEC to prove their independence of Washington, the prospect of a weaker market in 2001 may prompt the organisation to maintain current output and risk a winter price spike."
Many analysts agree there is not an overall shortage of crude, rather of specific products.
No sooner had a crisis in US gasoline (petrol) supplies ended, than it was swiftly followed by a lack of middle disillate stocks and a shortage of heating oil ahead of the winter months.
Saudi Arabia, the world's leading oil producer, is estimated to have produced 150,000 barrels per day more than its official OPEC quota in July, but Saudi Arabia is said to have been left with unsold cargoes -- leading it to conclude that the market is not short of crude, rather than that prices are too high, GCES said.
The output increase is less than Saudi Arabia promised at the start of July when it triggered a sharp fall in prices by promising an extra 500,000 barrels per day to stabilise the market.
The move was criticised as "unilateral" by other OPEC members, although the organisation later said the extra oil would be forthcoming under OPEC's price band mechanism, which provides for an automatic increase if the price of an OPEC basket of crudes remained above 28 dollars for 20 consecutive days.
Prices have remained above that level since the start of last week and continued to climb in Monday's trade.
On the London market, benchmark Brent crude for October delivery was trading at 31.10 dollars a barrel, 66 cents higher.
In New York, light sweet crude for September delivery climbed 77 cents to 32.76 dollars a barrel.
According to GCES, this year's sustained high prices have meant that consumer price inflation in 2000 is almost a percentage point higher in "the advanced economies" and interest rates have increaase by about as much.
At the same time, economic growth in these countries is expected to drop to 2.5 percent per year in 2001 from 3.5 percent this year.
It added that one percent less growth implies 0.5 million barrels per day less oil demand in the member countries of the Organisation for Economic Cooperation and Development, apart from the direct drop in demand because of higher prices. – (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
