In demand: Ernst & Young expects oil prices to rise during the third quarter along with demand
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Consultancy group Ernst & Young expects oil demand and prices to rise during the third quarter of the year despite concerns about the global economy.
Josh Lewis 04 August 2011 02:34 GMT
In its quarterly report Ernst & Young said while the International Energy Agency’s release of 60 million barrels from emergency oil supplies, to fill the void left by lost Libyan supply, brought down prices temporarily, it did not believe it would be enough to fill the gap as the market moves into the high-demand season.
In order for that to happen it said Opec would need to increase output at a time when its spare capacity is at the lowest it has been in more than 20 years.
It added pressure on Opec to lift output was expected to rise considerably over the next three to five years, despite the producer group recenlty stating it expected demand to slow next year.
“Oil prices are dictated by supply and demand, and all signs point to modest oil demand growth and uncertain supply,” said Ernst & Young’s Americas oil and gas leader, Marcela Donadio, said.
“Barring a strong economic shock, continued strong oil prices seem to be in order over the next three to five years.”
Ernst & Young said output from the Americas was ramping up with increasing activity in the Gulf of Mexico since the ban on deep-water drilling was lifted, which was put in place following last year’s Macondo oil spill, although added output still remained below pre-2010 levels.
It also said output was increasing notably in Brazil, the Canadian oil sands and the Bakken formation in the Upper Midwest.
It added the production of natural gas in the US was nearing an almost 40 year high driven by the growing shale gas industry which accounted for almost 30% of total output.
Ernst & Young said upstream spending was expected to increase between 15% and 20% this year, nearing peak 2008 levels, but warned cost increases and staff shortages were becoming apparent as the boom in unconventional resources put a strain on service capacity.
Published: 04 August 2011 02:34 GMT | Last updated: 04 August 2011 02:34 GMT
