Oil prices rose to their highest level in eight months on the back of a report predicting impending supply shortages and expectations that OPEC will maintain current production quotas. Benchmark Brent crude rose to $27.31 a barrel on 14 May, while OPEC's reference basket price continued to hover around $25, the mid-range of its $22-28 price band.
'I do not believe there is a convincing reason to increase production by OPEC members at their meeting in June,' Qatari Energy & Industry Minister Abdulla bin Hamad al-Attiya said on 14 May. Other members agree that the target price has been achieved. 'Output levels will be reviewed in June but the current status is achieving the target price,' acting Kuwaiti Oil Minister, Information Minister Sheikh Ahmad Fahad al-Sabah, said on 14 May. 'We are within agreed quotas and this has proved to be beneficial.'
A report issued by the International Energy Agency (IEA) on 13 May said that 'oil market fundamentals, including the loss of 40 to 50 million barrels of Iraqi crude, point to a significant future tightening of the markets'. Offsetting this is the steepest quarterly drop in OECD consumption in 12 years. However, demand is expected to pick up as one-off factors such as the mild winter fade away, adding to the effects of economic recovery in the US.
Global demand for the year is forecast at 74.4 million barrels a day (b/d), the IEA said, up 420,000 b/d from 2001.
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