Analysts see $50 barrel of oil in sight

By SUSIE MESURE

Fresh concerns about political instability in the new Iraq prompted analysts at Barclays Capital to warn that a prolonged stop to Iraqi exports "would almost certainly be enough to push oil prices above US$50 a barrel".

Oil prices have surged by more than a third since the end of 2003 on worries that accelerating global demand has left supplies tightly stretched with little leeway for disruption. World oil producers are already pumping close to full capacity.

The price, which has nudged US$45 this week, has also been driven by turmoil at Yukos, the Russian oil major, which is battling bankruptcy.

Meanwhile, an approaching storm in the US Gulf yesterday prompted Shell to shut down small volumes of production and evacuate 500 workers.

The Venezuelan Energy Minister Rafael Ramirez said yesterday it could take six months before OPEC could increase production capacity.

"There is the potential for production to gain within a period of six months," Mr Ramirez said when asked about the OPEC group's current capacity.

Mr Ramirez said the cartel had little capacity to spare at the moment and added current prices could go higher. He said OPEC would discuss capacity at the cartel's next meeting on September 15 in Vienna.

Earlier, Mr Ramirez said Venezuela expected oil prices to remain near recent record highs for the rest of the year due to rising demand and instability in the Middle East.

US crude prices are unlikely to dip below $30 per barrel for the foreseeable future but could see some relief from ramped up OPEC production in the fourth quarter of 2004, the US Energy Information Administration said yesterday.

"Short of a serious slow down in demand during the coming months, the floor for prices probably remains above $30 for the foreseeable future," the EIA said in its monthly oil report.

The latest surge in oil prices has fed through to British petrol forecourts where motorists have had to pay an extra 2pence (6cents) a litre over the past 10 days.

But Ray Holloway, director of the Petrol Retailers Association, said relief may be in sight as American holidaymakers return to work next month. "Demand will fall when America gets back from holiday so the short-term effect on petrol prices may get better," he said, while cautioning that rising demand would keep diesel costs high.

- INDEPENDENT