Oil prices hit new record highs above $61 a barrel on Thursday, driven by short-term supply fears as the first hurricane of the season threatened crude production and refinery operations in the Gulf of Mexico.
But private warnings also point to a worsening long-term outlook, with Saudi officials saying that the Organisation of the Petroleum Exporting Countries will be unable to meet projected western demand in 10 to 15 years.
At today’s prices, the world will need the cartel to boost its production from 30m to 50m barrels a day to 50m by 2020 to meet rapidly rising demand, according to the International Energy Agency, the energy watchdog for consuming countries.
But senior Saudi energy officials have privately warned US and European counterparts that Opec would have an “extremely difficult time” meeting that demand. Saudi Arabia calculates there is a 4.5m b/d gap between what the world needs and what the kingdom can provide.
Saudi Arabia has the world’s largest oil reserves and will need to bear up to half Opec’s production growth in the next 10 to 20 years, with the rest mainly coming from Kuwait and the United Arab Emirates.
Saudi Arabia pumps 9.5m b/d and has assured consumer countries that it could reach 12.5m b/d in 2009 and probably 15m b/d eventually. But a senior western energy official said: “They said it would be extremely difficult to move above that figure”.
But European officials hope that energy saving measures could curb oil demand. They believe Opec could produce the 44m b/d the world would need if consumers adopted efficiency measures under discussion by governments in the US and Europe.
G8 leaders are expected to discuss the high oil prices during their three day summit which began in Gleneagles, Scotland, on Wednesday.
Fears that US refineries are ill-equipped to meet winter demand for heating oil and other distillates have driven crude prices more than 9 per cent higher in the last week.
These concerns were compounded on Wednesday as Chevron, Shell and BP all reported they were evacuating workers from platforms in the Gulf of Mexico as tropical storm Dennis was upgraded to hurricane.
These concerns were compounded on Wednesday as Chevron, Shell and BP all reported they were evacuating workers from platforms in the Gulf of Mexico as tropical storm Dennis was upgraded to hurricane
The August West Texas Intermediate contract on the New York Mercantile Exchange hit a record $61.63 in early electronic trade, while on London’s International Petroleum Exchange, the front-month Brent crude contract climbed to an all-time high of $60.26 a barrel.