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UPI Energy Correspondent Washington (UPI) Aug 25, 2005 Oil prices are immune to the oil supply surplus on the global market, industry experts said Wednesday. Supplies are larger than usual heading into the third quarter, as it has been since April but oil prices continue to hover averaging $65 per barrel. Global oil supply exceeded demand by 1.5 million barrels per day for July, even more than in June. Oil prices continue to soar and the extra crude oil seems to be accumulating readily in inventories. But as the price of a barrel continues to rise or remain steady, there is an incentive for crude storage. As storage fills up, the picture may change, but for the time being the surplus is not creating downward price pressure. Industry analysts say the second quarter continues to show a big surplus, about double the usual second-quarter level, and that pattern could extend on into the third quarter based on the July trend and expected increases in production from several non-OPEC sources in the second half of the year, including the North Sea, Brazil and Angola. The year-on-year increase in non-OPEC supply in the second half of the year is producing 2.5 million bpd. If all that oil comes to market, it should be more than enough to meet expanding seasonal demand. Of course, hurricanes and other supply disruptions could cut into these anticipated supply increases. But if supplies remain abundant for the rest of the year, OPEC could face a growing dilemma. The supply-demand balance could start to signal a reduction in production from OPEC but the members will be reluctant to trim until prices head significantly lower. But by then oil inventories will be a lot higher and the market may be much harder to manage.
Closing oil prices, August 25, 3 p.m. London All rights reserved. © 2005 United Press International. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by United Press International. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of United Press International. Related Links TerraDaily Search TerraDaily Subscribe To TerraDaily Express 
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