Investors appeared treading cautiously, waiting to see how Ireland’s bailout will pan out and if more European countries will seek financial help. The focus may soon turn to Portugal’s debts as interest rates for its bonds have risen sharply. Global economic woes seem continuing and are impacting the oil markets significantly. China in the meantime, may also step up measures to curb accelerating inflation following a recent crackdown on commodity prices at the world’s second largest oil consumer.

And yet, despite the state of global economy still in a state of flux, a sense of hope, of rebounding crude consumption, somehow seems enveloping too. In the wake of stronger-than-expected economic growth in Europe and Asia, OPEC was obliged earlier the month to raise its oil consumption forecast for 2011 to nearly 87 million barrels per day next year.

In its November report, OPEC upgraded its forecast for world oil-demand growth in 2010 to 1.3 million barrels a day, an increase of 190,000 barrels.

OPEC now also foresees the world economy growing faster than it previously expected. It now forecasts the world economy to grow by 4.1 percent in 2010; above the 3.9-percent forecast it made in its annual outlook report. The International Monetary Fund too now forecasts global economic growth at 4.8 percent this year.

Consequently, the IEA too raised its global oil demand forecast again — this time by 0.2 million barrels per day, putting its projected 2011 demand to 88.5 million barrels per day, compared to the 87.3 million barrels per day projected for 2010.

Does all this indicating a somewhat tightening market? Some are already beginning to insist that market trajectory is on up. World demand is recovering faster than most forecasters had expected. J.P. Morgan Chase & Co., Morgan Stanley and Bank of America Merrill Lynch predict prices may rise to $100 in 2011. In tight markets, supply considerations come to the fore.

And this emerging scenario is widening the wedge between the producers and the consumers, with the producers insisting on rules and regulations to prevent the paper market from “dominating the whole oil market,” again. The issue of speculation is coming to fore and needs to be handled — rather urgently — it now seems. Oil market risks “chaos” and global supplies could be disrupted unless tighter regulation is imposed on the trade in oil-based financial instruments, the OPEC Secretary-General Abdulla El-Badri said.

“If there is a physical shortage, I think OPEC will act (and open up taps further),” he said. “If there is a shortage because of speculation, OPEC will not really act, because no-one will really buy our oil.”

In an interview with the Financial Times, El-Badri said that rapid swings in oil prices had been exacerbated by the private, bilateral over-the-counter derivatives market which, he said often exerted greater power than the physical realities of supply and demand.

The unusually big fluctuation in crude markets recent weeks was influenced by the decline of the dollar and Ireland’s financial woes, not the availability of oil. “When we see this swing of eight, nine, 10 dollars, it concerns us, it really concerns us. We cannot avoid volatility, it will be there, but it should be in a reasonable range,” El-Badri argued.

“We have to take into consideration the financial participants in the oil market now. Of course, we cannot eliminate them: they are there; they will stay with us as long as the market is there. But at least we would like to see adequate regulation.”

“There is regulation, almost in everything, but over-the-counter is a very huge quantity of money (and) there is no regulation whatsoever,” El-Badri told the FT. “I’m not asking to eliminate this OTC business, what I am saying is let us have adequate regulation.”

Otherwise, El-Badri said, “The consequences will be you will have chaos in the oil market. You don’t know the price; if you don’t know how much you will get for your oil, you will never be able to invest.”

He added: “We have to explore, we have to develop, we have to supply the market. If this chain is not continuously working, you will have a shortage.”

And hence El-Badri made OPEC output stance clear. Oil prices at $100 a barrel will only trigger action from the Organization of Petroleum Exporting Countries if they are accompanied by a supply shortage (and is not just a speculative blip), the OPEC secretary-general emphatically added.

No additional OPEC production would be needed if oil inventories in developed countries remain above 53 days worth of demand, El-Badri clarified, highlighting the other variable in the global supply-demand equation. Stockpiles were equivalent to 59.9 days of consumption in September, according to the International Energy Agency.

Crude therefore is unlikely to rise as high as $100 a barrel this year as unemployment and slow growth in the US and Europe curtail consumption, he said. Still, El-Badri said that prices of $100 a barrel would not necessarily derail the global recovery.

And he is not alone in taking this position. Oil consuming nations could tolerate oil at $100 a barrel if it guaranteed investment for long term supply; Iran’s OPEC Gov. Mohammad Ali Khatibi was quoted as saying last week.

“Sometimes it seems that the market has prepared for oil at around $100,” ISNA quoted Khatibi as telling a conference. “For the big consumers, security of supply is more important than the price,” he said, and that meant buyers accepted an oil price which gave producer countries incentive to invest.

However, not every one seems agreeing to the speculation theory, saying its impact is being overblown by OPEC and underlining that curbing paper market was impossible and that its power was often exaggerated. “It can’t be restrained, it shouldn’t be restrained and the fact is that it’s not a real force,” says Andrew Moorfield, head of oil and gas at Lloyds TSB Corporate Markets. “What’s really driving the oil price is the underlying reality of demand and supply,” he added.

As the market tightens, the divide seems getting wider and wider still.