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Global oil prices likely to increase in Q3 on rising demand, E&Y says


10:20, August 30, 2011

SINGAPORE, Aug. 29 (Xinhua) -- Oil prices should continue to rise in the third quarter this year as demand is expected to rise despite economic uncertainties in the United States and Europe, an analyst with Ernst & Young said on Monday.

Sanjeev Gupta, Asia-Pacific oil and gas leader for Ernst & Young, said many of the economies moved out of recession technically and are predicted to grow, albeit modestly, over the next few years.

"All signs point to modest oil demand growth and uncertain supply. Barring a strong economic shock, continued strong oil prices seem to be in order over the next three to five years," he said.

Oil prices rose to over 100 U.S. dollars a barrel in the first quarter on expectations for continued economic improvement and supply disruptions from the Middle East, but fell back recently as the economic recovery lost some steam and the International Energy Agency (IEA) announced the release of 60 million barrels from emergency supplies.

"The IEA's release announcement brought prices down temporarily and were expected to fill the void of Libyan supplies. However, as the market moves into the high-demand season, the IEA release will not meet that increased demand," he said.

In the short term, Gupta said the unknown factors also include the effects of the IEA announcement and the disagreement among the OPEC (Organization of Petroleum Exporting Countries) countries over supply increases.

The economic recoveries remain fragile and uneven, and a number of uncertainties are weighing on the global oil markets, including the impact of higher and more volatile prices on oil demand growth, he said.

However, "beyond the short-term, over the next three to five years, pressures on the OPEC to increase capacity and production are expected to increase substantially," he said.


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