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WASHINGTON -- With oil futures soaring past $44 per barrel amid supply concerns and rapidly rising global demand, analysts say it's possible prices could reach $50 in the not-too-distant future, reported the Associated Press.
"Fundamentally, there are some pretty crazy prices that are justified," said Jamal Qureshi, an oil market analyst at PFC Energy, a Washington-based consulting firm. "OPEC is putting out a lot of oil, but the market is absorbing it."
PFC Energy estimates that total global production will average 82.1 million barrels a day in 2004, or just 100,000 barrels a day above consumption, leaving very little cushion in the market in the event of a supply disruption.
Right now, geopolitical uncertainty in a host of oil-producing nations, including Russia and Iraq, is making energy traders edgy, raising fears that the supply-demand balance could tilt further in the wrong direction.
-- In Russia, the worry surrounds the fate of troubled oil giant YUKOS, which produces 2 percent of the world's oil but is under pressure from the government to come up with billions of dollars in back taxes.
-- In Iraq, insurgents' attacks against oil infrastructure are setting back the reconstruction of the industry and sending shockwaves through already jittery oil markets.
-- On Tuesday the president of OPEC, which accounts for about a third of global output, warned that it could not immediately boost output any further.
That helped propel light crude for September delivery to a closing price of $44.15 -- an all-time high on the New York Mercantile Exchange, where futures have been trading since 1983. Oil prices also hit new heights in London on Tuesday, closing at $40.64 on the International Petroleum Exchange.
Recent attempts by Saudi Arabia, the world's leading oil producer, to soothe markets have failed, analysts said, because there are doubts about how much more actual supply the country can add in the short term. Analysts believe that most of the remaining 1 million barrels per day in excess global capacity are in Saudi Arabia.
"It doesn't seem any supplies available in the near term will dampen prices," said Peter Beutel, president of energy consulting firm Cameron Hanover Inc. in New Canaan, Conn. "I don't know if we'll see $50, but it looks like prices want to climb higher here."