Oil Prices to Keep Rising in 2011: Analyst
Oil prices will gradually rise throughout the rest of the year despite a weakening in demand growth, Neil Atkinson, director of energy research and analysis at Datamonitor told CNBC on Monday.
"Because of supply management and a slight weakening in demand growth, prices are more likely to rise gradually," Atkinson said.
"The statistics will show that demand growth is weakening especially in the OECD countries.
On the supply side we have stocks that are adequate.
They are not very tight but we don't have a significant amount of spare capacity and that is under the control of Saudi Arabia and the other Middle Eastern countries," Atkinson told CNBC.
He said the only caveat to a "prices rising" scenario would be a replay of the 2008 financial crisis which would result in a sharp fall in prices as the leading producers cannot control the global economy.
He added that the producers had successfully managed the market so far. Even if demand weakened, prices would not slide too far," he said.
"The floor (oil price) for the Saudis a year ago was $70 to $80 a barrel but with the bills that have come in from the Arab Spring and the subsidies to the domestic populations, the floor has moved significantly up.
We don't know what it actually is but the general consensus is that for Saudi Arabia it's at least $85 a barrel, possibly higher," Atkinson added.
He said the main producers – Saudi Arabia, Iran and Venezuela - would not want to see prices fall and action, even if it were behind the scenes, would be taken to ensure prices did not fall too far.
The International Energy Association (IEA) announced last week that it did not foresee any further oil stock releases as witnessed in the summer. It released 60 million barrels of oil in an attempt to curb rising oil prices following the Libyan uprising and turmoil in the Middle East.