Persian Gulf oil rules could lead to $90 a barrel, consultant says

Originally at: http://www.pbn.com/contentmgr/showdetails.php/id/114132

Saudi Arabia, Kuwait and other Persian Gulf oil producers that account for a quarter of the world's supply will struggle to increase production by the end of this decade, pushing prices above $90 a barrel, unless they permit foreign investment, an industry consultant said.

"Translating oil that's in the ground into additional production cannot be done with the existing set of investment policies,'' Fereidun Fesharaki, president of Honolulu-based FACTS Inc., whose 50 clients include most of the top 10 oil companies, said in an interview in Dubai, United Arab Emirates, today.

Fesharaki, who will be among the speakers at the Middle East Petroleum & Gas Conference starting tomorrow in Dubai, said oil is likely to trade above $65 a barrel "indefinitely'' after 2007 because Persian Gulf producers that exclude international oil companies from developing their petroleum industries can't increase supply fast enough to keep pace with rising demand. His base forecast is for oil to trade at $90 a barrel by 2010.

The 11-member Organization of Petroleum Exporting Countries, including Saudi Arabia, Iran and Kuwait, is pumping close to its limit to bring down crude prices, which on April 1 touched an all-time high of $57.70 a barrel in New York. Rising oil prices contributed to slowing job growth and faster inflation in the U.S. in March, signs that the economy may be slowing.

Goldman Sachs Group Inc. analysts said on March 30 that oil may climb as high as $105 a barrel in the next several years as the market enters a "super spike'' period spurred by rising demand.

Bloomberg News
Published 04/04/2005