After a fall last week, oil prices have escalated above US$57 per barrel and approached a record high levels prevalent in April. Prices surged to about US$58.10 per barrel in New York and nearly US$57.50 in London.
OPEC has decided to increase production ceiling by 500,000 bpd on July 1 and might once again hike capacity by September. However OPEC is already pumping more oil than its official ceiling of 27.5 million bpd.
Then what is causing the hike in oil prices? A boom in world oil demand without a corresponding increase in refining capacity is creating a bottleneck. No significant investment in new refineries have been made for about 20 years despite spiralling demand for finished petroleum products, including distillates and petrol. Distillates comprise heating fuel and diesel. Markets are worried if there is enough refining capacity in the world and enough light sweet crude in the world to meet the growing oil needs? Refinery capacity problems could mean strong demand for distillates will not be met during the northern hemisphere winters in Q4 persistently causing oil prices to spike. In the winters, demand for crude oil is expected to reach about 2.2 million bpd higher than last year,
21-Jun-05 
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