DUBAI, 1 November 2005 — Oil prices are expected to remain as high as $60 to $70 a barrel in the next few years because of strong global economic growth and refinery bottlenecks in some industrial countries, a US energy official said yesterday.
“As for prices in the short term, they will remain between $60 and $70 a barrel in the next two to three years,” said Aloulou Fawzi, an energy economist in the US department of energy. “I am not saying that the era of cheap oil is over but you have to accept such prices in the short term,” he said in an interview with the Dubai-based Pipeline oil and gas magazine to be published next week.
The market is suffering from a shortage of light sweet crude, Fawzi said and called for increased production by Saudi Arabia and other producers of this type of crude. Fawzi also called for the construction of advanced refineries that can process heavy crude. US oil demand is projected to increase sharply in the long term and a large part of the rise will be met by Gulf Arab oil producers.
Fawzi said measures should be taken to ease prices, including increased production of light sweet crude. But he added that only a few countries have this kind of crude like Nigeria, Algeria, West African countries and Saudi Arabia.
He noted that apart from Saudi Arabia, there is not enough light sweet crude in the Gulf region, adding regional producers need to set up more petroleum crackers and sophisticated refineries in a bid to stabilize the market.
Meanwhile, world oil prices lost more than a dollar yesterday, as expectations of warmer weather in the United States and OPEC assurances that it has adequate spare capacity to meet demand offset a strike threat at Europe’s biggest refinery, analysts said.
New York’s main contract, light sweet crude for delivery in December, shed $1.42 to $59.80 per barrel in pit trading. In London, the price of Brent North Sea crude for December delivery plunged $1.30 to $58.12 per barrel. “What we are seeing now is a short term reaction to the weather in the United States, which is expected to be a bit warmer this week,” Barclays Capital analyst Kevin Norrish said.
Fimat analyst Mike Fitzpatrick said demand for heating was expected to be about 30 percent below its normal level for this time of year this week because of warmer temperatures.
Weighing also on prices were comments by OPEC’s acting Secretary-General Adnan Shihab-Eldin, who said in Moscow yesterday the 11-member organization’s spare oil capacity stood at 2.0 million barrels per day - more than enough to cover demand during the northern hemisphere winter.
