Oil Confounds as Prices Rise While Demand Falls
Platt, Gordon, Global Finance
Oil prices have doubled since February without any help from fundamental demand. In fact, demand projections have been revised downward due to the global recession. How long can this levitation act continue?
"The global financial crisis has turned the economic landscape upside down, with huge implications for the oil and gas sector," says NobuoTanaka, executive director of the Paris-based International Energy Agency (IEA). "In the natural gas sector, we have moved from a tight supply-anddemand balance with extremely high gas prices to an easing one with plummeting prices," he points out.
In June the IEA said global demand for gas is expected to fall in 2009 tor the first time in 50 years. The organization's medium-term oil market report sharply cut the IEAs forecast for oil demand, which declined in 2008 and is expected to fall again this year.
So, why are oil prices rising? Prices have responded to improving equity markets and hopes for economic recovery, as well as the weaker dollar, according to a report by Riyadh-based Samba. …