We went into the weekend with oil solidly above $105 and this price appears sustainable. In fact, there are few indications that the price won't continue to rise over the next few weeks:
- Mideast heating up; Bahrain/Saudi story may be more troublesome than some think
- Libya's oil industry is off-line for the foreseeable future
- US driving season just about to begin
- Japan switching to fossil fuels
- Japan's rebuilding yet to start
- US domestic drilling program in decline; glimmers of hope in the Gulf but deep water drilling rigs have moved to off-shore Africa
- China will re-assess role of fossil fuels vis a vis nuclear energy
- Canadian pipeline to US stalled for another year
Oil prices hit another post-recession high this week as economists said the world will keep consuming more petroleum even with this month's destruction in Japan and the wave of uprisings in North Africa and the Middle East.
China's oil demand has jumped 15 percent this year. Analyst Sudakshina Unnikrishnan has raised her forecast for the average price of benchmark oil to $106 per barrel this year from $91.
Meanwhile, major oil producers like Saudi Arabia already have cranked up production to make up for lost Libyan oil. While this increases the flow of oil right now, it also cuts off spare production that could have been tapped later this year to meet increasing world demand. Spare production capacity, which was thought to be around 5 million barrels per day earlier this year, has since dropped to about 3 million barrels, Unnikrishnan said.
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