Oil price blamed on low stocks
THE International Energy Agency, the developed world’s energy watchdog, blames falling global stock levels for high crude oil prices.
‘‘ Stocks are clearly tighter than they have been for some time, but what is driving market expectations, and therefore prices, is the lack of confidence that they will be replenished,’’ the IEA said in its monthly report on the oil market.
World oil prices climbed last week ahead of US Government data expected to show a further drop in stockpiles.
‘‘ There’s complete consensus over the market that stocks will draw (fall) in the fourth quarter,’’ said IEA chief analyst Lawrence Eagles.
The Paris-based organisation held its forecasts for oil demand steady, saying it was waiting for new assessments of the global economy in the light of recent turmoil on global financial markets.
It predicted average demand to be 85.9 million barrels per day (bpd) in 2007 and 88 million bpd in 2008.
The International Monetary Fund and the Organisation for Economic Cooperation and Development are soon to give updated estimates on the health of the global economy.
Recent turmoil in global financial markets and weakness in the US housing market has raised uncertainty about the outlook for growth.
‘‘ In August the situation looked very bad, but then there were interest rate cuts (in the US) and injections of liquidity by central banks, which tend to give confidence,’’ said Eagles.
The IMF is to publish its projections next week.
World oil supply increased by 415,000 bpd in September from August owing to higher output in North America, China and from OPEC members, averaging 85.1 million bpd, the watchdog said.
The IEA said that the persistence of high crude prices was leading to substitution away from oil into other energy sources.
‘‘ There has been lot of substitution towards natural gas in recent months and that is a relative price effect,’’ said Eagles, explaining that this was a reaction to recent record crude prices above $US80 per barrel and the relatively low price of natural gas. AFP