Oil prices, fresh from striking records above $78 a per barrel, will remain firm in the third quarter of 2006, the Centre for Global Energy Studies said in a monthly report published today.
'The CGES expects oil prices to remain firm or even strengthen this quarter,' the influential research body said. With many Asian refineries undergoing maintenance shutdowns, global demand for oil would rebound and support higher price levels, which have already been boosted by simmering geopolitical tensions in the Middle East, the CGES said.
'Rising demand from refiners in the third quarter is expected to keep oil prices strong, with geopolitical and weather-related concerns adding volatility,' it added.
Crude futures have fallen by around 6% since striking recent record peaks earlier this month, but they remain some 20% higher than at the start of the year. Buoyant worldwide economic growth - which stands at 5%, led by China which is expanding at 10% - would prevent prices falling much further.
'If the global economy continues to grow as strongly as it did in the first half of the year, there will be no relief from high prices,' the centre said.
As a result of healthy economic growth prospects, the CGES added that it was revising upwards its estimate for global oil demand growth to 1.5% for 2006, compared with its previous estimate of 1.2%. In volume terms, the forecast for global oil demand growth stood at 1.3 million barrels a day over 2006, of which China accounted for 500,000 barrels, the CGES said.
'Although growth has slowed over the past two years as high oil prices encourage substitution away from oil in power generation and industry, demand for transport fuels remains strong,' it added.
Following the recent escalation in violence between Israel and Lebanon, London's Brent oil struck a historic $78.18 a barrel on July 17, while the light sweet crude hit a record $78.40 in New York on July 14.
'Oil prices hit new record levels over the past month as violence flared in the Middle East and the market feared for the security of oil supplies in the event of the conflict spreading to Syria or, possibly, Iran,' the CGES said.
For as long as the Middle East situation persisted, 'the oil market will continue to be at the mercy of geopolitical events, with prices staying both high and volatile', the CGES concluded.
