2004 a year of record oil prices
By Channel NewsAsia's UK Correspondent Suzanne Chislett
LONDON : The unexpectedly high demand for oil from China and the ongoing situation in Iraq have led to record oil prices this year.
In October, the cost of a barrel of oil in New York topped highs at above US$55.
While prices have dipped somewhat since then, analysts say oil prices will not return to the US$20 level.
Oil prices rose by more than 30 percent this year, along the way setting record highs in New York and London.
Analysts say the massive energy demand from China, a result of the country's booming economy, and from the United States is largely to blame for the increases.
Said Simon Wardell, senior energy analyst at World Markets Research Centre, "OPEC was cutting back expecting slower growth and that all just added up to a very high oil price because we had such tight supplies."
But even in January prices were climbing, on news that Shell, the world's third largest oil company, was slashing estimates of its oil and gas reserves by 20 percent.
The firm has also experienced problems at its Nigerian plants and recently announced its pushing back the dates of its 2005 shareholder meetings, amid ongoing uncertainty about its reserves.
The security situation in Iraq and the demise of Russian oil-giant Yukos have also impacted.
Said Mr Wardell, "They've fed into the general market concerns, but they haven't actually had too much impact in terms of actual oil on the market. What we've seen is markets concerned about potential losses rather than actual losses."
As oil prices have risen, the world's stock markets have also rallied.
Hilary Cook, director of investment strategy at Barclays Stockbrokers, said, "It's difficult to know how the equity market might have performed if the price of oil hadn't been as strong as it has this year.
"You have to remember that the oil price in real terms isn't as high as it looks because the dollar has been so weak. We have seen this massive depreciation of the dollar. So you can look at the oil price in that context."
Oil production is currently at a 25-year-high, with OPEC countries pumping almost 29 million barrels a day, around 1.7 million above their quota.
Ministers from the cartel's member states will meet in January where they are expected to announce cutbacks.
They will also discuss raising the basket price, the ideal price band for oil, from its current level of US$22-28 to US$32.
The Paris-based International Energy Agency research group believes demand growth will slow slightly next year.
But analysts believe the price of oil is likely to remain above the high through 2005.
Experts in London at least believe the days of the US$20s won't be revisited. - CNA
Copyright © 2004 MCN International Pte Ltd
channelnewsasia.com |
