Crude at record high, may touch $70 a barrel soon |
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Tue, 28 Jun 2005 06:40
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LONDON: Oil prices reached a new high at $60.54 a barrel Monday amid uncertainties in Iran's oil policy in the light of a new hardline president set to assume office in the country and the continuing growth in demand in spite of the prevailing high cost. The price marks the highest in more than two decades.
With hardly any signs of an increase in output in the short term and with demand outstripping supply, analysts predict the price may touch $70 a barrel soon.
True, the high price can affect the world economy to a certain extent, but a meeting of heads of central bankers in Switzerland last weekend allayed fears about any weakening trend.
"There was a general consensus that we will have high oil prices for at least the next two or three years," said Martin Redrado, Argentina's central bank governor, after the meeting.
On Monday, U.S. August crude commanded a price of $60.64 a barrel. London Brent too had a record at $59.21 a barrel, though it eased to $58.91 subsequently.
Oil industry analysts feel speculators appear to be measuring the consumers' capacity to absorb costs. They said only a significant economic slowdown can bring down the prices at this stage.
They also point out that the newly-elected right-wing President of Iran, Mahmoud Ahmadinejad, has said he would favor Iranian investors in the oil sector in the country. This may be a visible shift in the country's oil policy, which can support higher prices for Iranian oil.
"In all fields, including oil, priority will be given to local investors," Ahmadinejad had said at a news conference in Tehran.
Iran, OPEC's second-largest producer, had partly reopened its oil industry to foreign investors in recent years in an effort to restore output to levels before the Islamic revolution of 1979.
Ahmadinejad has said his nation would go ahead with its nuclear program, a step which the U.S. and other western countries are not happy about, and which may bring about more sanctions. This may disturb the oil balance, analysts feel.
The 2005 demand for oil is expected to be around 86 million barrels daily, according to International Energy Agency. Many experts feel this is a touch-and-go situation as there is little buffer possible in case of any disruption in supply. The surplus capacity is around 1.5 million barrel a day, which is mostly in Saudi Arabia.
Experts are also worried over the increased reliance of the U.S. on imports rather than refining oil in the country. There are fears that the refineries in the U.S. may not meet the winter demand for heating oil.
The Organization of the Petroleum Exporting Countries, which account for 40 per cent of the world's total crude output, has almost reached its capacity. It had said it is not able to stem the prices although it has increased its quota by 500,000 barrels a day about two weeks ago.
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