Oil and gas

Abstract

In the first half of 2008, the oil price in West Texas Intermediate (WTI) terms averaged US$111 a barrel, an increase of 81 per cent from the first half of 2007. In July 2008, the WTI price peaked at US$145 a barrel, a record high in real terms. The world oil price subsequently fell and in mid-September was trading below US$100 a barrel. The fall in world oil prices since mid-July reflects increased production from OPEC members and expectations that growth in oil demand will continue to slow in the second half of 2008 and during 2009. The slower rate of growth in global oil demand, including falling oil consumption in the United States and western Europe, reflects weaker economic growth across most of the world. In addition, there may have been a fall in speculative (or investment) activity on world oil markets. In the first half of 2008, investors purchased commodities such as oil to hedge against a falling US dollar. However, the US dollar has recently appreciated against major currencies and this has reduced the investment-related appeal of oil and other commodities. For the remainder of 2008, world oil prices are forecast to continue to decline, albeit moderately. The combination of increased OPEC production and slower economic growth is expected to continue for the rest of 2008 and into 2009. In the second half of 2008, the WTI oil price is forecast to average around US$103 a barrel. For 2008 as a whole, the WTI oil price is forecast to average around US$107 a barrel.