Oil supply 'is taking a back seat to demand'

15 December 2008

The outlook for oil supply is currently taking a back seat to "demand obsession" on the market, Alliance Trust has claimed.

Angus McPhail, the organisation's global oil and natural resources analyst, said that demand is the only factor driving oil prices.

But he added: "Over the long term, once the market returns to a more complete assessment of industry fundamentals, the effect of restricted supply will support rising prices."

The fact that Opec is watching global oil levels closely and is prepared to cut production accordingly, Mr McPhail claimed, is a "positive" step.

He said, however, that current supply measures being taken are likely to lay the ground for a decade of problems in the future.

Meanwhile, although the market is suffering, home heating oil customers seem to be benefiting from the low prices.

A barrel of Brent crude currently stands at $48.05 (£31.40) and US at $48.20 per barrel.

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