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Oil prices will remain "crazy" for the next few months, or
even years, as consuming countries demand more supplies, while the
Organization of Petroleum Producing Countries (OPEC) wants security of
demand to increase output.
Speaking at a symposium ahead of the 3rd OPEC Summit here, former OPEC
secretary-general Soebroto predicted that oil prices, currently
hovering around $90 per barrel, would likely rise again in the near
future and hit the psychological level of US$100.
"Is it likely that oil will reach $100? The answer is yes. There are
three issues contributing to this, namely, the drawdown in U.S. crude
oil stocks, the coming winter and the weakening of the U.S. dollar,"
Soebroto said.
He predicted that crude oil prices would stay high in the near future
and then find new stability in line with supply and demand in the
longer term.
In the shorter term, demand will remain strong, especially from
emerging economies such as China and India. However, in the longer
term, the slowdown in the U.S. economy would affect demand. Also China
and India would not continue to grow at their current levels of 9 to 10
percent.
Meanwhile, Robert Mabro, from the Oxford Institute for Energy Studies,
noted that oil prices are not determined by supply and demand alone.
Prices were even beyond the control of the oil producing countries, and
were much more determined by players in the financial markets.
"We cannot rely on price regimes. It's just totally crazy. One day it's
near $100, and 10 years ago it was $10," Mabro said.
A number of factors are contributing to this, including constraints on
investment faced by both international and national oil companies, he
said.
International companies are hostages to their shareholders who demand
extremely high rates of return on investment, while national oil
companies face financial problems.
There were also political constraints hampering a number of oil
producing countries from increasing output. Sanctions imposed on Iran,
and in the past on Iraq and Libya, had reduced their capacities to
invest.
While supplies are uncertain, demand is rising in line with growing
demand for energy to fuel world economic growth, with fossil fuels
expected to continue dominating the energy landscape until 2050.
According to Mohammed Hamel, head of OPEC's Energy Studies Department,
demand for crude oil would increase by 35 million barrel per day (bpd)
to about 110 million bpd by 2030. Most demand would still come from the
developed countries.
OPEC, currently supplying 30 million bpd out of the world's total
demand of 84 million bpd, will play an increasingly important role in
meeting future demand for oil as its member states control 78 percent
of the world's existing oil reserves.
OPEC secretary-general Abdullah Al-Badri noted that oil producing
countries would invest more to increase production only if there was a
security of demand.
With current demand trends, Al-Badri said that OPEC member states would
be investing up to US$150 billion in 120 projects to produce 19 million
bpd by 2015.
Indonesian Minister of Energy and Mineral Resources Purnomo Yusgiantoro
revealed Thursday that the country aimed to increase output to slightly
over 1 million bpd, from the current level of slightly above 900,000
bpd.
As of last September, Indonesia had been producing oil at below the
900,000 level, the smallest output in OPEC, besides Qatar.
Robert Mabro noted that the easiest way to boost OPEC production would
be to increase output in Saudi Arabia.
"Saudi could produce much more (than its current level of around 8 to 9
million bpd), but do you really want it? Surely not sustainable when
huge extra oil supplies come onstream.".
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