Oil price blamed on low stocks

The Weekend Australian - Travel - - Resources -

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

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