Another major piece of news that should drive crude has come out. The IEA has revised its figure for global oil demand upward. Global oil demand will hit a record high this year, the International Energy Agency (IEA) said, according to Reuters.
The revision makes sense in terms of the normal demand that would accompany the end of a recession. China especially has shown an increasing appetite for crude. It has been shopping the world for both oil deposits and oil sands. To a large extent that takes supplies for other countries out of circulation
The IEA says, oil demand would reach an average of 86.60 million bpd this year, up from 84.93 million in 2009.
Crude has already moved out of a nearly six month period during which it traded between $70 and $80. In recent weeks it has moved as high as $87. Both Goldman Sachs and Morgan Stanley have predicted that the price for a barrel of oil will rise above $100 in 2011. But, if the IEA is right, the could happen more quickly.
The IEA forecasts does not take into account weather related oil flow interruptions caused by events which include hurricanes in the Gulf of Mexico, or political unrest in Venezuela, Nigeria, or Iran. Also not included in the forecasts are breakdowns in aging oil transportation infrastructure like the ones that connect south from Canada and Alaska.
Finally, the IEA numbers are likely to be driven on the supply side to some extent by new deposits, primarily those found in deep water. The problem with these is that the deposits are so far beneath the ocean’s surface and the ocean’s floor that current drilling technology may not be able to reach them
Douglas A. McIntyre
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