Asian Demand may Push Oil Price to $100
- By Business World
- Published May 17th, 2010
- News
- Unrated
BILLIONAIRE Mukesh Ambani who runs the world’s largest refining complex, said Friday that the petroleum industry must be ready for oil prices to rebound to $100 a barrel or more on growing consumption in Asia.
“We have to again be actively prepared to see a three-digit oil price” amid sluggish refining growth and higher marginal cost of production at new fields, Ambani, chairman of Reliance Industries, said in a speech at a conference in Mumbai Friday, adding, “$80 to $100 is the norm.”
Crude oil for delivery in December 2018, the contract dated furthest into the future, rose to a four-month high of $100.38 on May 3 in New York on concern that the BP oil spill would halt future U.S. offshore drilling. Open interest in December $100 calls, bets that prices will breach that level, reached 84,309 contracts Thursday, making it the most widely held option.
“Ambani is right on with his message,” said Victor Shum, a senior principal at U.S. energy consultants Purvin & Gertz in Singapore. “Crude oil prices are more likely to continue to go up rather than down. I would even venture to say they’re likely to range between $70 and $100 to the end of the year.”
Oil prices peaked at a record $147.27 a barrel on July 11, 2008, before plummeting to $32.40 on December 19 that same year as the world’s worst recession since World War II slashed demand.
Global oil demand is forecast to increase two percent this year amid growth in emerging markets, stemming two years of declines, according to the International Energy Agency in Paris.
Earlier this week, Bank of America Merrill Lynch repeated its forecast that crude prices will exceed $100 a barrel next year as a result of growing demand in emerging economies, and the potential for lower interest rates among those nations.
“We have to again be actively prepared to see a three-digit oil price” amid sluggish refining growth and higher marginal cost of production at new fields, Ambani, chairman of Reliance Industries, said in a speech at a conference in Mumbai Friday, adding, “$80 to $100 is the norm.”
Crude oil for delivery in December 2018, the contract dated furthest into the future, rose to a four-month high of $100.38 on May 3 in New York on concern that the BP oil spill would halt future U.S. offshore drilling. Open interest in December $100 calls, bets that prices will breach that level, reached 84,309 contracts Thursday, making it the most widely held option.
“Ambani is right on with his message,” said Victor Shum, a senior principal at U.S. energy consultants Purvin & Gertz in Singapore. “Crude oil prices are more likely to continue to go up rather than down. I would even venture to say they’re likely to range between $70 and $100 to the end of the year.”
Oil prices peaked at a record $147.27 a barrel on July 11, 2008, before plummeting to $32.40 on December 19 that same year as the world’s worst recession since World War II slashed demand.
Global oil demand is forecast to increase two percent this year amid growth in emerging markets, stemming two years of declines, according to the International Energy Agency in Paris.
Earlier this week, Bank of America Merrill Lynch repeated its forecast that crude prices will exceed $100 a barrel next year as a result of growing demand in emerging economies, and the potential for lower interest rates among those nations.
