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The future economic crisis to decide the fate of the oil market

Date: February 16^th 2010 Author: Martin Kerin Category: Articles
Topic: Oil and oil derivates

Representatives of OPEC, the organisation bringing together petroleum exporting countries, have confirmed in Vienna that their expectations regarding the growth of oil demand this year are very low. According to them the global market will still be highly affected by an unpredictable economic recovery.

In its latest report OPEC stated that a slow economic recovery in 2010 will have an impact on the demand for oil. The ambiguity in outlooks mainly comes as a result of a slow recovery of demand in the USA, OPEC also claims.

PHOTO: Petrom archive

Oil production is expected to stay at the last year's level. The next chance to change these plans is in March, when ministers of member countries will decide on this year's volumes again. For now OPEC also thinks there will not be any significant change in oil prices.

Higher demand in Asian countries

Meanwhile, the International Energy Agency (IEA) says in its own latest projection that oil demand has already reached its peak, especially in highly industrialised countries, and will not return to 2006 and 2007 levels. The reasons for this are, above all, better efficiency and an increased use of renewable energy sources in developed countries, the web site Oil online cited the chief economist of IEA, Fatih Birol, who has recently presented the agency's outlook in Rome.

In 2010 oil demand is expected to be highest in countries and regions such as China, India and the Middle East. China alone is to account for 40 percent of the total future oil demand. Projections show that by 2018 the country will reach the same level of demand as the US has now.

At the same time, the IEA economist has brought attention to future unreliability of oil supply. As a result of both a possible rapid economic growth in the next two or three years and reduced investments in this sector due to the crisis, the amounts of oil produced could be insufficient, leading to an oil price increase, Birol said. To stay at the current level of oil production, 45 million barrels of oil need to be produced in new oil fields by 2030, he estimates.

Estimates of world economists as to future oil prices are very varied. Some analysts project the average price of crude oil to be about USD 75 per barrel in 2010 and to grow to about USD 82 in 2011, while according to other predictions the price of oil will only reach USD 65 per barrel this year.

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