Developments in the oil industry should help cool crude prices in 2007 but the market will remain vulnerable to geopolitical tensions, OPEC said in its July report, published today.
'The expected increase in OPEC capacity, combined with the projected decline in required OPEC crude, should help to moderate prices,' the Organisation of the Petroleum Exporting Countries said.
'Whether the market will benefit from the full effect of these trends will depend mainly on downstream developments and non-fundamental factors, particularly geopolitical tensions, a major factor behind the current record high oil prices,' it added.
OPEC capacity is expected to increase by 1 million barrels a day to 34.3 million bpd by the end of 2007 but demand for the cartel's oil is set to drop to an average 28.1 million bpd, down 600,000 bpd from the estimate for 2006, due in part to high oil prices and slower economic growth, the report said.
Non-OPEC supply in 2007 is set to increase by 1.7 million bpd, to 53.1 million bpd, compared to 51.4 million bpd in 2006, mainly helped by Africa, North America and Latin America, OPEC added.
Oil prices remained high today as violence continued to rage in the Middle East amid concerns about a wider conflict.
New York's main contract, light sweet crude for delivery in August rose 47 cents to $77.50 a barrel in electronic deals before the official daily opening of the US market. The contract had struck an all-time high of $78.40 on Friday.
In London, the price of Brent North Sea crude oil for September delivery hit a record high of $78.18 a barrel. The contract was trading at $78.05 a barrel this afternoon, which marked an increase of 60 cents from its close on Friday.
