'Oil price could rise to $55 a barrel'

ABU DHABI — Despite crude oil projections for 2005 and 2006, call for worldwide growth averaging 2.2 million barrels per day, 2.6 per cent, per year, down from the 3.4-per cent growth in 2004, the oil prices would remain sensitive to any incremental oil market tightness which could raise it to an average of $55 per barrel, said US Energy Information Administration.

By Haseeb Haider

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Published: Sun 10 Apr 2005, 10:49 AM

Last updated: Thu 2 Apr 2015, 3:59 PM

In a forecast, it said that the average West Texas Intermediate (WTI) crude oil price for the first quarter of 2005 was $49.77 per barrel, approximately $14.50 per barrel higher than in the first quarter of 2004 and $1.10 per barrel, above the first quarter 2005 projection in the previous Outlook.

WTI prices are projected to remain above $50 per barrel for the rest of 2005 and 2006.

Several factors have contributed to the recent high crude oil prices and are likely to keep prices at or near present highs. First, worldwide petroleum demand growth is projected to remain robust, despite high oil prices, but is likely to moderate in response to slower Chinese growth, which exceeded 1 million barrels per day in 2004.

The EIA projections for 2005 and 2006 call for worldwide growth averaging 2.2 million barrels per day, or 2.6 per cent, per year, down from the 3.4-per cent growth in 2004, as Chinese demand growth is projected to moderate to an average of 650,000 barrels per day annually in 2005 and 2006.

Second, expected growth in non -OPEC supplies is not expected to accommodate worldwide demand growth; worldwide spare crude oil production capacity has recently diminished and is projected to remain low; freight rates, although down from those in 2004, are projected to remain high in historical terms.

The geo-political risks, such as the continued insurgency in Iraq and political unrest in Nigeria and Venezuela, are expected to keep the uncertainty premium high.

High levels of production from members of the OPEC contributed to inventory builds in the Organisation for Economic Cooperation and Development (OECD) countries from February through November 2004.

Since then, OECD oil stocks have moved more toward the middle of the 5-year historical range. However, OECD stocks have not grown in terms of days-of-supply- the number of days that inventories would satisfy demand- because demand has grown rapidly as well.

U.S. crude oil inventories, now near the middle of the historical range, are much improved compared to this time last year. Some of this improvement is expected to dissipate over the forecast period.

On March 16, OPEC announced it would increase its production quota by 500,000 barrels per day and was prepared to approve an additional 500,000-barrel-per-day quota increase should oil prices remain at current levels.

The EIA's projections had already assumed prior to the announcement that OPEC production would increase to meet growing world oil demand.

The current Outlook forecasts increases in OPEC production to meet increased world demand but EIA's estimates for non-OPEC supply overall have not changed significantly since March.

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