The price of one barrel of North Sea Brent Crude has exceeded the 100 dollars level, amid indications that prices may continue to rise to higher levels in the foreseeable future, as a result of large increases in oil demand, beginning with last autumn. This trend is expected to continue during the current year, in addition to the major political shifts in the Arab world that are casting their shadow on oil markets. One important indicator of market shifts is the information published by OPEC'S monthly ‘OPEC Bulletin' in its latest issue, regarding the production increase by OPEC member states of about 400 thousand barrels per day, added to the level of 29.72 million barrels per day seen last January, as the price of one barrel of Brent Crude Oil rose above the 100 dollar level. This level of output is in fact the highest for OPEC's members since December 2008. In this regard, the U.S. Energy Information Administration announced that its forecasts show that demand for oil will rise during this year above the 90 million barrel level in the fourth quarter, which is a record figure. Meanwhile, the Commissioner for Energy in the European Commission has warned against the negative repercussions on the recovery of the European economy, should oil prices continue to rise above 100 dollars. Demand for oil has generally increased in 2010, leading prices to increase gradually to approximately 85-90 dollars instead of 75-85 dollars. The upsurge in prices, which began last September, can in fact be attributed to the unexpected economic recovery in Western industrialized countries and to the sustained economic growth witnessed in emerging Asian countries. Meanwhile, the youth uprising in Egypt, and the subsequent concerns in the markets that the Suez Canal and the SUMED line may be shut down, have also recently helped sustain price increases. But although more than two weeks have elapsed since the start of the Egyptian uprising, there is no indication that these facilities are being targeted. So far, the flow of oil through them has not been interrupted. And despite the daily comments regarding the threat of the canal being closed, the truth is that the average quantities carried through it is about 1.8 million barrels per day, and almost the same quantity is carried through the SUMED line. In the meantime, there are reports that a sufficient number of tankers is available, to ship around 4 to 5 million barrels per day of crude oil in case the canal is closed, and in case the tankers have to navigate a longer route from the Arab Gulf to Europe around the African continent. Furthermore, if the current high levels of production persist, then oil will ultimately find its way to the markets, but with increased shipping costs of course, and subsequently, increased prices. What about the coming months of this year, then? The information listed above points to a substantial increase in demand, and subsequently, continued price increases, perhaps even beyond their current levels. Moreover, the Arab uprisings will continue to impact global oil markets, which will remain cautious and vigilant for any new political shifts in the region, in light of the developments in Tunisia and Egypt. This is of course a new additional factor that will in turn lead to continued increases in prices. *Mr. Khadduri is an energy expert
