Jun. 19--Rebounding global oil demand led by China and recent supply cuts will certainly drive oil prices above $100 per barrel from the current $70 level, one of the world's biggest energy funds said yesterday.

The current price of $70 per barrel is rational and prices should linger in this range before starting to surge. But the upswing in prices depends on how soon the US and European economies move toward recovery, said Malcolm Smith, product specialist for natural resources equity products of London-based BlackRock, an energy fund.

"We are entering a high-demand period dominated by driving, hurricanes and winter weather. China, the driver of global demand growth, has shown positive signs with oil imports rising 6.6 percent year-on-year in April," Mr Smith said yesterday in Bangkok.

"A return to over $100 for oil prices is inevitable but will not occur until both oil inventories and Opec spare capacity have again been eroded."

Global oil demand should decline from last year to 83.4 million barrels per day, based on a world gross domestic product (GDP) forecast of -1.4 percent.

Meanwhile, the International Energy Agency (IEA) estimates global capital expenditures for oil companies will reduce by 21 percent, or $100 billion, this year from 2008, including a 50 percent drop in North America.

Without substantial new investment, oil production from existing energy sources would decrease by about 6-9 percent every year.

About 70 percent of those fields were discovered more than 40 years ago, resulting in high depreciation of the output.

Prasert Bunsumpun, president and chief executive of PTT Plc, still projects world oil prices of $50 to $60 per barrel this year. He estimates 2010 prices will be around $60 to $70.

"The existing hike in oil prices is driven by speculation, not real demand as current inventories remain high," said the PTT chief executive.

SET-listed Thai Oil Plc forecasts oil prices to stay in a range of $67 to $72 this week and ease shortly on speculation and the weakness of the dollar.

West Texas Intermediate (WTI) crude rose 56 cents to $71.03 on Wednesday while Dubai crude closed flat at $70.

Viset Choopiban, a board member of the Petroleum Institute of Thailand, said oil prices were set to rise as global supply may see a shortage in the next 18 to 24 months because investments in production have decreased.

"The government needs to step up efforts on energy conservation and renewable energy development to cope with the resurgence of oil prices," said Mr Viset, a former energy minister and former president of PTT Plc.

"Oil subsidies are not considered essential when oil prices are around $70 to $80 per barrel," he said.

-----

To see more of the Bangkok Post, or to subscribe to the newspaper, go to http://www.bangkokpost.com.

Copyright (c) 2009, Bangkok Post, Thailand

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

A service of YellowBrix, Inc.