Demand Concerns Hamper Oil Investments

The International Energy Agency’s Oil Market Report last week cut its estimate of world oil demand for 2006 by almost 300,000 barrels per day. The announcement reinforces growing concerns within OPEC over demand security.

Ever since the oil price began its inexorable rise from $26.36 per barrel in September 2003, markets have been speculating on the point at which demand would begin to respond to these ever-higher prices. To date, there has been little or no sign of demand destruction. However, fears that at some point lower demand would emerge have begun to raise questions among major oil producers over the advisability of investing heavily in new crude producing capacity.
Forbes