Oil prices may face downward pressure

ABU DHABI - Oil prices in 2004 could face downward pressure due to increased supply into the market, but prices do not seem to be vulnerable to violent swings as witnessed earlier. In the long term, trends in the oil market point towards increased supply and a downward pressure on prices, according to a new report by released by the emirates industrial bank, EIB.

By (WAM)

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Published: Tue 10 Feb 2004, 12:33 PM

Last updated: Thu 2 Apr 2015, 11:51 AM

The EIB report titled "developments in the oil market," stated: "The short term expectation, viz. for the year 2004 is mostly downwards, as increasing supply into the market will put a downward pressure on prices. Most Western institutions expect average oil price in 2004 to be less than $25.

However, oil prices momentarily do not seem vulnerable to violent swings as witnessed earlier.

This seems to be a major qualitative change in the oil market, which serves well both the buyers and the producers. "The EIB report meanwhile indicated that the long term trends in the oil market point towards increased supply and a downward pressure on prices." "Economic events in Kuwait and two key producing countries, iran and iraq will be critical," the report pointed out.

"The end of the old regime in Iraq, has given fresh impetus to oil companies to increase exploration in Kuwait.

Meanwhile, the discovery of the world's biggest oil field was announced in southern iran in July may not have immediate impact, but when production does come online, it may increase supply and possibly Iran's quota.

However, more significant will be the role of Iraq, whose vast underdeveloped resources are likely to have an enormous influence on the prices in the future.

The current plan is to increase Iraqi production to 8 million barrels per day by 2010.

Considering that the normal Iraqi quota before its tribulations was 2.8 mbd and current production a mere 0.7 mbd, if this production is really implemented, the influence on price can be imagined," the report added.



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