Oil price drop, OPEC raises demand forecast

17th January 2011, Comments 0 comments

Oil prices fell on Monday even as OPEC forecast higher demand growth in 2011, as traders booked profit amid a public holiday in the United States -- the world's biggest consumer of crude.

Brent North Sea crude for delivery in March slipped 41 cents to $97.97 in midday London trade.

New York's main contract, light sweet crude for February delivery dropped 36 cents to $91.18 a barrel.

The OPEC oil cartel, which pumps 40 percent of world crude, revised upwards its 2011 world demand growth estimate on Monday, given the pace of global economic recovery and cold winter weather in the northern hemisphere.

The Organization of Petroleum Exporting Countries said it was pencilling in world oil demand growth of 1.23 million barrels per day (bpd) or 1.43 percent to 87.32 million bpd for this year, compared with 1.37 percent previously.

"The magnitude and the speed of the world economic recovery will have a remarkable impact on world oil demand this year," the cartel said in its latest monthly bulletin.

Optimism about the global economic recovery and interest from bullish investors have been the twin drivers of the surge in crude prices over the past week, analysts said.

"The crude futures are quite close to $100 and speculative traders have generally gone bullish on the market," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.

"There are many investors betting on accelerating global economic recovery, and so we have got these high prices," he told AFP.

The rise in global oil prices has been attributed to a harsh winter hitting Europe and parts of North America, as well as growth in China and other developing nations.

Crude prices first touched $100 a barrel in January 2008 and major oil producer Iran said Sunday it was possible that this would happen again, but ruled out an emergency meeting of OPEC to discuss the matter.

"The price of $100 is not unrealistic in this situation," Iran's Oil Minister Masoud Mirkazemi, who currently heads the OPEC cartel, told reporters on Sunday.

"Even if the oil price crosses $100 a barrel there is no need for an emergency OPEC meeting. Some OPEC members believe there is no need for an emergency meeting even if oil reaches 110 or 120 dollars a barrel."

Iran is OPEC's second largest crude exporter behind Saudi Arabia and holds the world's second largest gas reserves.


© 2011 AFP

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