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Oil could drop to $40 a barrel says BP boss
Wednesday June 14th 2006
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OIL prices fell by 2pc to below $68 a barrel yesterday in the wake of a prediction by the head of BP that it could soon be heading to about $40 a barrel and a warning that high prices were curbing oil consumption.
The healthy global economy is helping to boost growth in oil demand across the globe, but high prices are slowing consumption in the US, the world's biggest fuel consumer, the International Energy Agency (IEA), said in a new report yesterday.
It delivered its report in the wake of fresh comments on the oil price outlook from BP supremo Lord Browne.
He told the German magazine 'Der Spiegel' this week that oil prices could fall back to as low as $40 a barrel in the medium term, and to as low as $25 a barrel within the next decade.
On the markets yesterday oil fell by as much as 2pc in New York, with the price of a barrel of crude sliding towards $69 a barrel as investors took heed of rising interest rates and higher inflation.
US crude for July fell fell $1.46 to $68.90 a barrel to build on Monday's $1.27 slump. In London, Brent crude lost $1.73 to $67.20 a barrel.
The IEA, which acts as energy adviser to 26 industrialised countries said output constraints in Nigeria and Iraq had deflated OPEC's spare capacity to only 1.9 million barrels per day (bpd).
Supply disruptions to the 85 million bpd world market have driven oil to historically high levels above $70, leading some to suggest that record prices will slow demand expansion.
"Strong economic growth is an important counterbalance but, on the whole, we're seeing evidence of high price effects coming through," said Lawrence Eagles, head of the IEA's oil industry and markets division.
The Paris-based agency trimmed 2006 global oil demand growth by 10,000 bpd to 1.24 million bpd, with the US seen as the clearest case for lower consumption.
Projected US demand growth of 0.9pc for this year was well below what might be typically expected given forecast economic growth of up to 4pc, the IEA said.
Earlier this year US retail gasoline climbed above the $3 a gallon pain threshold for motorists there.
China, the world's second biggest oil consumer, offered a more positive outlook. It was expected to post growth in apparent demand of 8.6pc before slowing to a still robust 5.9pc during the second half of 2006, said the IEA.
Higher retail fuel prices were likely to encourage refiners in China to increase processing rates in the near term, boosting apparent demand growth.
But the rebound in consumption was expected to be temporary, with the higher prices having a dampening effect later.
Analysts also said data from China was unreliable.
Oil could drop to $40 a barrel says BP boss
Wednesday June 14th 2006
ADVERTISEMENT
OIL prices fell by 2pc to below $68 a barrel yesterday in the wake of a prediction by the head of BP that it could soon be heading to about $40 a barrel and a warning that high prices were curbing oil consumption.
The healthy global economy is helping to boost growth in oil demand across the globe, but high prices are slowing consumption in the US, the world's biggest fuel consumer, the International Energy Agency (IEA), said in a new report yesterday.
It delivered its report in the wake of fresh comments on the oil price outlook from BP supremo Lord Browne.
He told the German magazine 'Der Spiegel' this week that oil prices could fall back to as low as $40 a barrel in the medium term, and to as low as $25 a barrel within the next decade.
On the markets yesterday oil fell by as much as 2pc in New York, with the price of a barrel of crude sliding towards $69 a barrel as investors took heed of rising interest rates and higher inflation.
US crude for July fell fell $1.46 to $68.90 a barrel to build on Monday's $1.27 slump. In London, Brent crude lost $1.73 to $67.20 a barrel.
The IEA, which acts as energy adviser to 26 industrialised countries said output constraints in Nigeria and Iraq had deflated OPEC's spare capacity to only 1.9 million barrels per day (bpd).
Supply disruptions to the 85 million bpd world market have driven oil to historically high levels above $70, leading some to suggest that record prices will slow demand expansion.
"Strong economic growth is an important counterbalance but, on the whole, we're seeing evidence of high price effects coming through," said Lawrence Eagles, head of the IEA's oil industry and markets division.
The Paris-based agency trimmed 2006 global oil demand growth by 10,000 bpd to 1.24 million bpd, with the US seen as the clearest case for lower consumption.
Projected US demand growth of 0.9pc for this year was well below what might be typically expected given forecast economic growth of up to 4pc, the IEA said.
Earlier this year US retail gasoline climbed above the $3 a gallon pain threshold for motorists there.
China, the world's second biggest oil consumer, offered a more positive outlook. It was expected to post growth in apparent demand of 8.6pc before slowing to a still robust 5.9pc during the second half of 2006, said the IEA.
Higher retail fuel prices were likely to encourage refiners in China to increase processing rates in the near term, boosting apparent demand growth.
But the rebound in consumption was expected to be temporary, with the higher prices having a dampening effect later.
Analysts also said data from China was unreliable.
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