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NEW DELHI: World oil prices may have softened but a further fall in rates is expected to be only moderate because of higher demand from Brazil, Mexico and countries from Asia and the Middle-East, an ICRA report said.
"Global demand in the latter half of 2009 is expected to touch 89 million barrels per day, compared to 85 million barrels per day at the end of 2007," the report 'Oil & Gas Sector Outlook' said.
Global oil prices have fallen from the peaks of $147 a barrel touched last month to $113 per barrel this week.
ICRA said the annual demand for oil is likely to be met, if additional OPEC supplies until the end of 2009 are maintained at 37 million barrels per day the level first forecasted for quarter one of fiscal 2008.
It is unlikely that crude prices would move below the 2006 levels of $67 per barrel in the next one year, given the supply constraints and past record of slippages in new project development, ICRA said. There are also contingencies to be provided for short-term supplies disruptions and demand spikes.
The current hike in crude oil prices has been attributed partly to the increased demand from India and China - whose combined consumption accounts for 50% of the total US consumption and about 13% of total global consumption.
India, which imports 78% of its crude oil requirement, had a consumption growth in 2007 pegged at 6.5%, ICRA said.
In terms of growth, Indian imports have increased by an average of 7% during the five years to 2007.
In view of the Indian perspective, medium term prospects are strong even though inflationary pressures indicate an imminent slowdown, ICRA said.
"Unlike subsidy cushion of the earlier years, consumers have had to pay for their increasing demand for oil through periodic retail price hikes in petroleum products. This has helped effect demand moderation either through substitution or curtailed use," ICRA said.
The report added that for India to sustain the high economic growth momentum gained in the past two years, certain strategic measures to secure energy resources need to be religiously followed.
These comprise wider use of locally available alternative fuels, greater deployment of mass transport system, faster development of exploitable coal and gas resources, prudent use of subsidies for market regulated petroleum product demand and more determined policy stands in international oil field acquisitions.
"The triggers for high oil price periods may have differed but the primary cause has been the supply shortages created by the OPEC (Organisation of Petroleum Exporting Countries) producers," the report said.
"The effects of all oil shocks have been similar: inflationary pressures followed by search for new energy substitutes, decreased consumption and new technology deployment for recovering oil from the fields considered difficult so far," it added.
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