Doubling in oil price tipped
London: Oil prices will more than double by the end of 1999, says an influential new report.
Investment bank Goldman Sachs' report dismisses oil production data from the International Energy Agency as over-optimistic and warns that Middle Eastern States are set to reassert their dominance in the market as Western companies cut output.
Goldman suggests the Organisation of Petroleum Exporting Countries (OPEC) will be able to make its recent price rises stick, and says: "OPEC is intent on gaining a substantially higher percentage of the world's oil production."
The report, compiled by Goldman in New York, puts the bank at loggerheads with both the IEA and the US State Department, whose official position is that sophisticated global oil trading makes a re-run of the 1973 and 1979 oil crises impossible.
It may also cast a cloud over the IEA's 25th birthday party in Paris on Monday. The agency, set up after the 1973 oil shock to co-ordinate Western responses to energy shortages, has forecast non-OPEC oil output will rise this year by 100,000 barrels per day (bpd). This would weaken the impact of the tough cuts package agreed by OPEC's 11 members in March, which has helped pull the oil price back from below $US9 a barrel in January to more than $US15 mid-week.
Goldman believes non-OPEC output will slide by up to 500,000 bpd in 1999, substantially lifting OPEC's share of the market. A move of 500,000 bpd either way can shift the price several dollars. World supply totals about 75 million bpd and a change of just 2.25 million bpd can nearly halve or double the price.
"[An] environment where demand is growing and non-OPEC supply is declining will cause demand for ... [OPEC oil] to rise very sharply. We have now entered such an environment," it says. - The Guardian
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