The US government on Tuesday emerged as one of the most bullish forecasters of oil prices, raising its outlook for this year to nearly $50 a barrel.
The report by the US Department of Energy pushed Brent crude futures, the European benchmark, to an all-time high in nominal terms of $53.20 a barrel. The rising oil price also helped propel the Reuters CRB index, which tracks a basket of commodities, to a 21-year high. Concern about high oil prices will dominate the Organisation of the Exporting Petroleum Countries meeting in Isfahan, Iran, next Wednesday.
The US estimated in its March short-term outlook report that the 2005 average price of West Texas Intermediate (WTI), the US oil benchmark, to $48.95 a barrel, up 7.5 per cent on last month’s report. It also raised the 2006 WTI average to $47.05 from $43.20 previously, indicating it believes high oil prices are here to stay.
This time last year, it predicted a price of only $29.40 in the forecast for 2005. The Department of Energy warned yesterday: “Oil prices are likely to be sensitive to any incremental supply tightness that appears during periods of peak demand worldwide. Imbalances in light product markets could cause light crude oil prices to increase to well above $50 per barrel, as has recently occurred.”
It said its forecast was based on Opec not cutting production at the Isfahan meeting.
The report saw no sign of slowing demand, predicting an increase in global oil consumption averaging 84.7m barrels a day in 2005, up 200,000 b/d from the February report. The increase was due to China, where demand is forecast to average 7.4m b/d, up 12 per cent from last year.
Washington is concerned about supplies from non-Opec countries because lower production would increase dependence on Opec oil. It said lower production in Mexico and the North Sea would contribute to a 300,000 b/d decline in non-Opec supply forecasts to