Oil Unlikely To Drop Below $100
Oil was unlikely to fall below $100 per barrel as strong demand from emerging economies such as China and India put a floor under prices, a member of Kuwait’s top oil council said in remarks published on Sunday.
They say they don’t anticipate a full-blown collapse in crude prices despite a slowdown of the US economy, the world’s biggest oil importer. Neither do they see a major spike in crude prices due to the latest geopolitical tensions erupting between Russia and Georgia, which has led to Russia resorting to airstrikes and pounding Georgia’s capital, Tbilisi.
“The oil market doesn’t seem to be very perturbed by the happenings in Georgia. There is a downward bias in the oil market that will continue for a little while,” said Dalton Garis, associate professor of Economics at the Petroleum Institute in Abu Dhabi.
On Monday, in early trade, Brent crude futures on the ICE in London were trading a shade above $114 a barrel. In contrast, on the New York Mercantile Exchange, the Nymex crude oil futures for September delivery in the US were trading close to $116.50 per barrel.
“The crude prices in the near-term look like trading in a range of $100-$120 a barrel,” said an oil analyst, who didn’t want to be identified.
Analysts say the world oil output of nearly 87 million barrels per day (bpd) is just about keeping pace with current demand, with new demand being led by China and India. Saudi Arabia is the only oil producing country with any major spare capacity, so the market supply is getting increasingly tight with the world oil consumption growing by around 1 million bpd each year.
Ground reserves. The reserves in the ground, meanwhile, are not getting replaced enough with new significant discoveries that can help keep the crude prices in a lower range.
Steve Peacock, president for the Middle East and South Asia for global energy major, BP, said that “continuing tightness in supply versus demand and tightness in spare capacity” will ensure that the prices don’t drop significantly from the current levels.
UK-based John M. Roberts, an energy security specialist with Platts, a provider of energy information, agrees. “Insufficient investment in developing new oil producing fields by producer countries, mainly Opec [Organisation of Petroleum Exporting Countries], and insufficient investment in alternative sources of energy by main consuming states means that the [supply] position will remain generally tight,” said Roberts.
Still clearer indications of where the world oil prices are headed will come on September 9, when Opec oil ministers meet to discuss their output policy.