Oil Prices Surge
Americans buy gasoline
Oil prices hit a 17-month high yesterday amid fresh evidence of continuing strong demand for gasoline in the US, the world's biggest oil market.
The bellwether August Brent futures contract reached $17.17 a barrel at midday before slipping to $16.90 in late trading on London's International Petroleum Exchange, 3 cents up on Tuesday's close.
Oil prices have risen by about $6 a barrel this year, mainly in response to production cuts by the Organisation of Petroleum Exporting Countries (Opec) and other leading oil producers.
The market's belief that Opec is generally complying with the latest cuts is the main reason prices continue to rise, although energy economists say it will take some months to erode the stock overhang that was one of the main contributors to last year's oil price collapse.
Peter Davies, chief economist at BP Amoco, said yesterday that any declines in global stock levels in the second quarter of the year were probably "very small". But if the Opec cuts held through the rest of the year "the decline will accelerate".
Speaking at a London presentation of BP Amoco's annual statistical review of world energy, Mr Davies said the global oil industry remained in a "supply push world" in which cost-cutting and technological advances prevailed.
Although non-Opec production was flat last year and may decline in 1999, Mr Davies dismissed suggestions that non-Opec supply had peaked. Opec still faced the challenge of managing oil markets "in a world of plenty", he said.
Although there is evidence of a "tentative recovery" of Asian oil consumption, Mr Davies said it was unlikely that oil demand growth in the region would return to the very high levels seen before the crisis.
He identified several long-term trends that continue to affect world energy markets. Supplies of energy are "more than adequate" on a global basis, even though world energy prices continue to decline. Coal is continuing to lose market share to natural gas, while the growth of nuclear power has receded, with more nuclear plants being shut last year than were commissioned.
World energy demand fell by 0.1 per cent last year, the first fall since 1982. In China the decline was 3.2 per cent, with lower coal consumption accounting for virtually all of the fall. Energy consumption in North America and Europe was flat.
The decline in energy consumption led to the first fall in world carbon emissions (excluding the former Soviet Union) since 1982.
The Financial Times, June 17, 1999 |
