Concerns that OPEC might curb supplies at its meeting on March 16, coupled with cold weather in North America and Europe have triggered a surge in oil prices.Crude oil prices have edged past US$51, rising 5.8%, their highest level in nearly 4 months. Light sweet crude futures on the New York Mercantile Exchange jumped by over US$2 to $51.15 a barrel yesterday. Does this jump signify that 2005 has the potential to be an even tighter year than 2004? Global demand is expected to grow 1.8%, to 84 million barrels a day this year. On the supply side, forecasts for Canadian and Russian production have been reduced and output from non OPEC is expected to slowdown in 2005.
In 2004, demand rose by 3.4% to 82.5 million bpd- the strongest pace of growth in nearly three decades. Strong growth in demand coupled with supply concerns have pushed oil prices up 49% over the last year. October witnessed oil prices surge to US$55.67 a barrel in October 2004, and then drop to nearly US$40, when OPEC intervened to prevent further declines and cut production at the beginning of January.