Oil prices poised to take off, warn analysts
Sunday 02 March 1997
Although the consensus view still holds that oil will average $18 a barrel this year, those who believe in a sustained rise to $20 or more are gaining credence. Bears, meanwhile, are still reeling from having their 1996 predictions of $15 to $16 a barrel proven so badly wrong - the price of Brent crude averaged $24 for the year.
Some analysts are now worried that an oil shock, like the 1973 crisis orchestrated by the Organisation of Petroleum Exporting Countries (Opec), could occur if there is political instability in Saudi Arabia or a serious disruption in another significant producing country.
The bulls argue that both sides of the supply and demand equation are being squeezed, at a time when excess capacity (at less than 10 per cent, including the blockaded Iraqi production) and stocks (at 57 days consumption, down from 70 days) are at record lows.
"Demand has been grossly underestimated," said Tony Alves, oil analyst at Henderson Crosthwaite. "I just don't think rising production is going to support that demand."
Fergus MacLeod, the head of oil research at NatWest, owner of oil analysts Wood MacKenzie, added: "The major factor is overestimation of supplies from outside Opec."
Global production has increased from 42.4 million barrels per day to 43.5 million b/d since 1990, with all of the extra production covered by 2.5 million b/d of increased output from the North Sea.
But the growth in British and Norwegian oil production has been due to better technology - such as three-dimensional seismic surveys and horizontal drilling - which can help to wring more from ageing fields.
Mr MacLeod said that although North Sea production will continue to expand, it will do so at a much slower rate. "Other people are assuming the prolongation of the lives of these fields is going to continue indefinitely. There's a mounting body of evidence that that's not going to happen."
Production in the CIS is also unlikely to grow, as Russia has yet to implement a legal structure with which foreign companies feel comfortable.
Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
Shock poll shows voters believe Ukip is to the left of the Tories
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
New era of cheap oil 'will destroy green revolution'
Ukip founder Alan Sked and Nigel Farage 'begged Enoch Powell to stand as a candidate'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
iJobs Money & Business
£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...
£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...
$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager In...
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...