Tight Global Supply to Underpin Long-Term Oil Price

…Jeffrey Currie, an analyst at Goldman Sachs in London, said the only way to avoid a spike in crude prices above $90 a barrel this autumn is a ramp up in production by Saudi Arabia, Kuwait and the United Arab Emirates.

“These three countries are the only members of OPEC that took significant supplies off the market a year ago, have not increased production with the recent rise in prices and still have significant spare capacity,” he said.


Currie estimates that keeping OPEC production at current levels, and assuming normal weather this winter, would mean total petroleum inventories will fall by 6.5% by the end of 2007, a move which could push the crude price to $95 a barrel.

OPEC, for its part, continues to plead innocence when the market looks for a scapegoat to blame on the current high oil prices. Instead it says high gasoline prices are underpinning crude as the U.S. refining system struggles to keep up with demand.

Gary Adams, oil & gas industry leader at consulting firm Deloitte & Touche in Houston, said tightening gasoline supply, caused by a lack of capacity in the U.S. refining system, will keep crude oil prices close to $70 a barrel and possibly $80 barrel in the next few months.

He expects the stuttering U.S. refining system to experience more maintenance issues in the months ahead.

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