Experts say crude price will stay high

The price of crude oil backed off slightly on Aug. 25, after hitting another all-time high at $68 a barrel in Asia.

The International Monetary Fund says it is likely oil prices will remain high in the medium term.

“We expect that oil prices will not recede in the medium term ... not even to (the level of) 2004,” IMF Managing Director Rodrigo de Rato said in an Aug. 25 Dow Jones Newswire report.

Rato said oil prices are likely to stay high, driven by high demand not only from China and India but also by increased consumption in the United States. He said inefficiencies in the supply of oil products by state-run oil companies and refinery bottlenecks also add upward pressure on crude prices.

He acknowledged that there was a “high degree of speculation” in the oil markets, but even without it, Rato said “demand forces and supply constraints” will keep prices high in the medium term.

On Aug. 22 Dow Jones Newswires carried a story on a Center for Global Energy Studies report that said even with high oil prices starting to slow demand, prices will stay high this year and next because of lagging new oil output and the Organization of Petroleum Exporting Countries’ new $50-a-barrel price target.

“There is little prospect of oil prices falling far either this year or next,” CGES, a leading London-based oil consultancy said in a research note.

—Petroleum News