Oil cost dips despite IMF warning

High demand and soaring prices are here to stay, the IMF says

Oil prices dropped below $54 a barrel on Friday as worries about stockpiles eased, but warnings that the world is in for sustained high prices persisted.

In afternoon trade, US light crude was down 26 cents at $53.85 a barrel with London Brent 44 cents lower at $53.60.

US government figures on Thursday showed that domestic stocks were at a three-year high.

But at the same time, the International Monetary Fund warned high oil prices were a "permanent shock" to the world.

In its six-monthly World Economic Outlook, IMF senior economist Raghuram Rajan said oil was set to stay at $39-56 a barrel in today's money for much of the next 25 years.

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Before adjusting for inflation, that meant a headline price of $67-96 as demand from China and the rest of the developing world continued to soar on the back of improving living standards.

China could need 18.7 million barrels a day by 2030, up from the current 6.4 million, the IMF said.

World demand was likely to grow to 138.5 million barrels from 82.4 million, with demand for oil from producers' cartel Opec set to more than double.

"In short, it's going to be a rocky ride forward," Mr Rajan said.

Warnings

But he said fears of a $100 barrel were not the most likely scenario.

A week ago, markets were shaken by a Goldman Sachs report which warned of a price of $105 a barrel.

Since then, oil prices have fallen 7% this week from the all-time peak of $58.28 in New York on Monday.

The rise in energy costs prompted oil cartel Opec, source of a third of the world's oil, to boost production quotas by 500,000 barrels a day to 27.5 million, hinting that a second rise could be possible in June.