Crude may rebound above US$100 per barrel, according to analysts and industry officials. But it is a question of timing. Christophe de Margerie, the chief executive of the French energy group Total, said low levels of investment in oil exploration and development meant oil prices could rise "well above" the $100 mark as resurgent demand outstripped supply.
"The problem is when. The problem is to anticipate this, not to send a message to scare people but to send a message [that] it's important to invest now," he said in an interview with the BBC. "We might be faced with insufficient oil to cover demand and I think it's our role to say it in advance, to force people in charge of our countries to think about this concern we have and we need to share and prepare because in two, three years it will be too late."
Mr de Margerie warned of an oil shortage by 2015 if no immediate action was taken to stimulate investment in new supplies. Morgan Stanley, the US investment bank, last week raised its 2012 price forecast for crude to $105 from $95 because of tightening spare production capacity. "Assuming demand returns to growth, we see global spare capacity back to 2007, to 2008 levels by 2012 and getting even tighter thereafter," Morgan Stanley analysts said in a report.
"We believe prices will need to move higher to ration demand as the world struggles to find enough supply. Once demand growth is re-established we expect the market's attention to shift back to the long-term structural supply issues facing the oil market." The report forecasts the worldwide glut of idled oil output capacity, estimated at 6.7 million barrels per day (bpd), shrinking to 3.3 million bpd within three years, or less than 4 per cent of global oil demand.
Adding to the bank's supply concerns, oil exporters' plans to add more production capacity in 2013 and beyond look vulnerable. Among potential problems, major political uncertainties are threatening to cause serious delays to plans by Kuwait, Iraq, Iran, Venezuela, Nigeria and Brazil to add millions of barrels per day of new oil production. "The post-2013 surge in capacity is very much in the 'if everything goes exactly according to plan' category," the Morgan Stanley report said.
"The bulk of these projects are expensive (Canadian oil sands), technically extraordinarily challenging (Brazil) or face geopolitical challenges (Iraq, Venezuela, Nigeria, Kuwait). "If a significant portion of these supplies fails to materialise, global spare production capacity would be drastically reduced," it added. However, crude was unlikely to move much above the current level of about $70 per barrel until it was clear the world economy was recovering from its sharpest downturn in decades, the Centre for Global Energy Studies said in its latest monthly report on Monday.
The London-based energy consultancy said it expected little sustained upward pressure on oil prices this year. "Even next year, prices are unlikely to rise much unless clear signals emerge that the world is pulling out of recession in a sustainable fashion," it added. Christof Ruhl, the chief economist of the largest British oil producer, BP, forecast two years of stable oil prices due to ample near-term spare capacity which would suppress price spikes.
With slow recovery in global oil demand and countries such as Russia already increasing their exports it could take three years to burn through excess supplies, he said. Mr Ruhl said OPEC's grip on the oil market had weakened significantly amid the supply glut, making it more likely that the group's discipline over output quotas would break down. But Khalid al Falih, the president and chief executive of Saudi Aramco, told Bloomberg the world's biggest oil exporter would leave some fields idle next year because recovery in world demand had failed to materialise.
"I don't expect a major shift in demand unless we see an acceleration of the economic recovery, which is not yet apparent," he said. "We have the excess capacity in case it's needed but we also have the ability to sustain ourselves with production levels similar to what we see today at prices similar to what we have seen so far." Aramco, the Saudi state-run oil monopoly, is pumping crude at about two thirds of its capacity as a result of weak global demand and Saudi Arabia's commitment to contribute to the record output cuts OPEC pledged last year.