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Last Updated: Wednesday, 29 September, 2004, 11:25 GMT 12:25 UK
Oil prices ease on Nigerian talks
Oil tanker carrying crude oil, Port Harcourt, Nigeria
Rebels could still threaten these oil supplies from Nigeria.
The price of oil has fallen on reports of peace talks in Nigeria, where rebel fighters had vowed to attack the country's oil installations.

Light sweet crude was priced slightly lower at $49.83 a barrel during European morning trading.

Analysts do expect prices to remain close to the record $50-mark, reached earlier this week.

Uncertainties have instilled a "fear factor" into the market, says OPEC president Purnomo Yusgiantoro.

Long view

The latest positive news from Nigeria has done little to alter the overall sentiment of experts.

Oil prices of about $50 a barrel could be with us for some time, say many economists and oil analysts.

The price of oil is illogical
Vittorio Mincato, chief executive Eni

While threats to supplies by rebels in Nigeria could be easing, the aftermath of hurricane damage in the US Gulf coast and instability in Iraq continue to play a role in keeping oil prices high.

China and India have "an almost insatiable demand" for oil and petrol to keep cars, trucks and industries running, says Clark Winter, chief global investment strategist of Citigroup Private Bank.

Eastern Europe and Latin America could further strain oil supplies as they join the US and old Europe as major oil consumers. It is also becoming more difficult to meet growing demand, experts say.

The amount of oil the world can supply is limited and oil prices are expected to remain high to the end of 2004 and into 2005, says Barclays Capital.

Estimates of spare global capacity have fallen to less than one million barrels a day, less than a sixth of what they were in 2002, it said.

Higher prices for petrol and other fuel
Higher air fares
Higher costs for all companies, possibly leading to job losses
Higher retail prices as costs are passed on
Economic growth hit as consumer spending falls

There are continuing worries about whether it is possible to pump more oil despite the promise by Saudi Arabia - the world's largest oil exporter - to raise production capacity by 1.5 million barrels to 11 million barrels a day.

"Should there be another shock, then prices will set another series of historic highs well above $50," says Barclays.

Corporate threat

That view was not altogether shared by the chief executive of Eni, Italy's biggest oil and gas group.

"The price of oil is illogical and should fall later this year and in 2005," says Vittorio Mincato.

If that is wishful thinking on the part of Mr Mincato, then he is not alone in his hope that high oil prices would just go away.

As the sun began to set on Asian trade Wednesday, concern was growing over how high oil prices might effect corporate earnings.

Airlines and transport firms will be hardest hit, according to one Singapore brokerage.

Economists also believe that Asia's economic growth will be hit by higher consumer prices and lower domestic consumption.

The natural and man-made threats to oil stocks

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