Supply cuts 'sowing the seeds' for price boom

19 February 2009

The current downturn in the oil market could be "sowing the seeds" for future price hikes, analysts have claimed.

Crude oil prices have plummeted in recent months, falling from highs of close to $150 (£105) a barrel in the summer.

The global economic crisis has caused demand for the fuel to decline dramatically and Opec has been forced to carry out a series of supply cuts in a bid to stabilise prices.

However, analyst at BNP Paribas Harry Tchilinguirian told Reuters that this could be setting the market up for a further boom in future.

"Demand will eventually recover and delays in supply investment may be just sowing the seeds of a future price rally," he explained.

This could prompt some residents to stock up on home heating oil supplies at current price levels to avoid the effects of any future rise in the value of crude oil.

The market experienced a mixed day on Wednesday as US crude for March delivery rose slightly to settle at $35.07 a barrel, while London Brent for April fell $1.08 to $39.95.

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