Oil prices to stay $50-$60 this year

Leony Aurora, The Jakarta Post, Jakarta

Global oil prices are likely to remain between US$50 and $60 throughout the year amid strong demand and an overall improvement in the world economy, an analyst says.

British energy giant BP Plc's head of energy analysis Michael Smith said there was a very low capacity of oil producers to meet current demand.

"It's quite difficult to increase capacity in the short term," he said after presenting the company's annual statistical review on world energy here on Monday.

Oil prices surged to a fresh record high on Monday as New York's main contract, light sweet crude for delivery in August approached $61 in New York on heightened supply worries.

In London, the price of Brent North Sea crude oil for delivery in the same month jumped to $59.10 per barrel. Brent prices have steadily climbed from $30 early last year to $40 six months later and broke new ground at $50 in October 2004.

"(Oil) consumption is growing by between 1.5 million and two million barrels a day (this year)," said Smith. "There's a lot of pressure. I won't be surprised to see oil (at between) $50 and $60 throughout the year."

In 2004, global oil consumption rose by 2.5 million barrels a day (bpd) or 3.4 percent, the fastest rate of growth since 1978. China alone, zooming past other countries with an economy growth of 9.5 percent, was responsible for 900,000 bpd of this increase.

In this year's first semester, growth in China's oil demand seemed to abate, said Smith, as capital investment eased, especially in industries that required abundant energy.

But with the coming colder seasons in the second half, demand from China would be quite strong, he added.

Current soaring oil prices are actually not the highest in value ever traded in history. The world saw oil at $35 in early 1980s, which if converted into today's terms is equal to $82.

Smith said it would be impossible to predict whether the fossil fuel would reach such levels this year.

"If you saw a supply disruption like (previously) in Venezuela and Iraq, you'd see prices going to that kind of level," he said.

"But if we don't have a supply disruption and the economy slows down, you'll see prices coming off a bit," he added.