Oil rally 'unlikely to happen before winter arrives'

Abu Dhabi: The dollar's appreciation against the euro and the falling fuel consumption in the US, Europe and Japan due to their economic downturn is going to keep global oil prices on a tight leash near term with the next bull run in oil not expected before winter demand rises in the west, say experts.

"The oil prices, my suspicion is, will be trading in a range between $90-$110 a barrel probably until mid-November," said Dalton Garis, associate professor of Economics at the Petroleum Institute in Abu Dhabi.

Brent crude prices on the ICE Futures Exchange in London fell to a five-month low on Wednesday and had dropped below $98 a barrel on Friday in early trade after it became clear the Organisation of Petroleum Exporting Countries (Opec) had kept their output targets unchanged.

However, oil prices on the New York Mercantile Exchange (Nymex) continue to remain above the three-digit mark, drawing support from Hurricane Ike. In early trade on Thursday, the light sweet crude oil futures for October delivery in the US were trading below $102 a barrel on the Nymex.

Global oil prices have been on a decline since mid-July after trading at an all time record high of $147.11 a barrel on July 11.

"We are seeing the markets return to the fundamentals of supply and demand," said Kate Durian, Middle East editor of energy information provider, Platts.

"The price of oil, it will much depend on the dollar's behaviour - the stronger the dollar, the lower the oil, global oil demand projections and non-Opec oil output.

New agreement

Also, how well the Opec countries abide by their new agreement to pump oil as per their existing quotas," Dourian added.

Official figures from the US government's Energy Information Administration (EIA) show that the Americans have been consuming less oil overall.

Total oil consumption data from the first half of 2008 compared with the first half of 2007 show that Americans consumed, on average, 925,000 bpd, or 4.5 per cent less oil.

The US is the world's biggest oil importer and its import figures are the benchmark for gauging world's oil supply and demand situation.

Over the same period, UK, France, and Italy also posted continued declines in oil consumption, said the EIA. It noted that the consumption in the rest of the Organisation for Economic Cooperation and Development (OECD) countries was relatively flat.

According to the EIA's latest short-term energy outlook, OECD countries consumed about one million barrels per day less in the first half of 2008 than in the first half of 2007.

The official selling price of Abu Dhabi National Oil Company's (Adnoc) crude grades - Murban, Lower Zakum, Upper Zakum and Umm Shaif averaged $115.93 in August, 17.04 per cent lower than the July average price, in line with the decline in the international oil prices.