IMF: Oil price rally 'will be short-lived'

24 June 2009

Crude oil prices are unlikely to continue rising unless there is a significant recovery in world energy demand, the International Monetary Fund (IMF) has claimed.

The IMF's chief economist Olivier Blanchard said on Wednesday that the recent rally has been based on speculative bets from traders and is not expected to be maintained in the coming months.

Home heating oil customers have seen crude prices trading at around $68 (£41.10) a barrel this week - more than double the level they were at in January.

However, Mr Blanchard said prices are not expected to increase much above $70 a barrel in the long term.

The economist explained that the recent market rally was driven largely by speculation, which "can affect prices but not for very long", and would not be maintained unless there is a recovery in demand.

His comments come despite a joint warning from Opec and the European Union that the oil "bubble" of 2008, where prices reached nearly $150 a barrel, could be repeated in the future.

The two groups warned that the market will remain volatile unless there are significant regulatory reforms and greater transparency in the financial sector.

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