Oil prices to remain high till next June; North Sea Brent oil prices would range from $28 to $30 per barrel, BOK says
High international crude oil prices are expected to weigh down on Korea's trade balance for a considerable period of time.
In a forecast on future crude oil prices, the Bank of Korea (BOK) predicted that the price of North Sea Brent oil would range from $28 per barrel to $30 per barrel till the second quarter of 2001.
The central bank based its forecast on the fact that the current supply shortage will not ease in the short term as major oil exporting countries are unlikely to increase their production sharply.
"Given the present supply-demand situation, the supply bottleneck is unlikely to disappear over the short haul though it may be affected by the result of an upcoming OPEC meeting," the central bank said.
Oil ministers of OPEC, or the Organization of Petroleum Exporting Countries, are scheduled to meet this Saturday to determine whether to scale up their production levels.
Till the upcoming meeting, oil-producing countries are thus expected to maintain their output at current levels, becoming a burden to importing nations, the central bank said.
Even if OPEC nations decide on a production hike under pressure from the United States and other advanced nations, the increased production volume will be minimal and it is unlikely for the global oil supply to rise sharply for the time being, the central bank pointed out.
"If they agree on an output increase, the amount is unlikely to exceed 500,000 barrels per day as most OPEC nations except for Saudi Arabia and Arab Emirates are known to be unable to increase their production further," the central bank said.
Even if the OPEC nations decide on a 500,000-barrel output hike, the actual amount of increased production will amount to only 240,000 barrels because their current output is know to exceed their target by 260,000 barrels, the central bank said.
In contrast, the global demand for oil is likely to go up sharply in coming months as the winter high season is only a couple of months away, the central bank projected. "Compared with the third quarter of this year, the worldwide demand for crude oil is expected to jump 1.8 million barrels in the last quarter of this year and 2.7 million barrels in the first quarter of 2001."
In particular, demand for crude oil from U.S. refineries is expected to shoot up since the U.S. inventory of heating oil as of mid August is down 39 percent from the same period last year, the central bank said.
If the United States and other advanced countries turn up the heat on Saudi Arabia to increase its production, there is a possibility that international crude oil prices may go down.
Even if pressure mounts, however, Saudi Arabia will find it difficult to increase its output sharply due to opposition from other OPEC nations. Thus a big drop in oil prices is unlikely, the central bank forecast.
by Kwak Young-sup Staff reporter
[This message has been edited by skipper (edited 04-09-2000).]