Analysts forecast slight oil price uptick for rest of year

A worker fills a motorist's tank. Experts believe rising demand from a recovering global economy would lift oil prices to above $55 a barrel for the remaining months of this year.

Local analysts expect global oil prices to rise slightly higher than anticipated for the rest of this year due to rising demand amid a recovering global economy, with increasing supply from some oil exporting countries tempering sharp price rises.

PTT Plc's petrochemicals and refining integrated synergy management (Prism) had forecast in November last year that the oil price could move in the range of US$50-$55 a barrel. The forecast was based on a gradual recovery of the global economy.

The forecast was close to an estimate made by the country's Energy Policy and Planning Office (Eppo) of $42-$52 a barrel.

But, Atikom Terbsiri, chief executive and president of Thai Oil Plc, said the global oil price is likely to rise above the $55 a barrel level.

He attributed the rise in oil price for the rest of the year to higher demand from households, particularly in the West, during winter and falling US oil stocks, which dropped by 40 million barrels to 478 million.

The recovering global economy also pushed oil demand to rise in the same direction.

"We could see oil prices rise above $55 for the rest of the year," said Mr Atikom.

But rising oil production in Nigeria of 1.7 million barrels per day and Libya of 1.9 million bpd are expected to weigh on the price.

Moreover, there could be additional oil supply from shale oil resources in North America if the global oil price continues to rise, with rising supply also weighing on price.

Rising oil prices at a time when the number of oil refineries in Asian-Pacific are still limited could make the gross integrated refining margin stay firm, said Mr Atikom.

He said there was no new investment in large capacity oil refineries, thereby limiting their numbers for the next two years, while oil demand in Asia-Pacific is rising by 3% per year.

Mr Atikom said Thai Oil's gross integrated refining margin and gross refining margin at the end of the third quarter was $10.2 and $8.1 a barrel, respectively.

Siri Jirapongphan, executive director of the Petroleum Institute of Thailand, said the recovering economy should gradually lead to the rise in oil production and demand, both of which are likely to reach 100 million bpd.

But he said disruptive technology such as electric vehicles are also expected to cut oil demand substantially in the long term.

As a result, Mr Siri said that the oil price should not exceed $60 a barrel since higher prices could make the production of shale oil worth investing in, with more crude from shale oil also eventually weighing on global prices.

Another oil expert, Manoon Siriwan, said the Nov 20 Opec meeting will decide whether to increase crude oil production, will be a crucial factor regarding oil prices next year.

Currently, Opec has maintained its cap on oil production at 33.2 million bpd.

"As North America's shale oil production has reached the peak of 9.8 million bpd, that should keep the oil price from rising above the $60 level," said Mr Manoon.