A gradual return of Iraqi crude to the world market will bring cheaper oil in 2004, but production delays will keep prices higher than previously thought, a Reuters poll showed on Tuesday.
CONSENSUS FIGURES from 16 contributing analysts predict the average price of benchmark Brent crude will slip by 16.5 percent from the previous year, or about $4.50, to $23.09 a barrel in 2004.
Forecasters have long predicted that increased supply, mainly from Iraq, will combine with slow demand growth to give lower prices next year, offering a much-needed prop to an unsteady global economic recovery.
But delays in post-war reconstruction of the Iraqi oil industry have forced most analysts to revise their 2004 price estimates upwards.
The poll predicted an average price of $27.63 a barrel for 2003, compared to consensus estimates of $26.53 from a similar poll in July this year.
And the previous poll had pegged the average 2004 price at $21.69, $1.40 lower than the new consensus figure.
“It’s all basically Iraq...That is the main thing people are waiting for,” said Daiwa’s David Stedman, adding that sabotage and looting had held up reconstruction efforts and that initial estimates for Iraqi production had proved optimistic.
Most experts see Iraqi production returning to pre-war levels by mid-2004, as well as increased supply from Africa and the former Soviet Union states, who are not part of the OPEC cartel that tries to control production to keep prices where it wants.
This year, OPEC has had a relatively easy time keeping oil above $25 a barrel, the mid-point of its target price range. A strike in Venezuela and violence in Nigeria kept down production from those countries, while war and tensions in the Middle East also supported prices.
However, analysts say 2004 does not hold such good prospects for the cartel, which they argue will have to cut output to keep prices from dropping out of its $22-$28 band.
“Looking forward we see a lot of non-OPEC supply growth...some recovery in Iraq, and mediocre demand growth for 2004,” said George Beranek, manager of market analysis at PFC Energy.
“OPEC is going to have to work a lot harder to maintain even a lower price,” he added.
OPEC meets on Wednesday to discuss output policy. Comments from leading delegates to the meeting have led the market to expect that current quotas will remain unchanged.