South Korea’s central bank forecast Monday that oil prices are likely to stay above $100 per barrel for a considerable period of time due to tight supply and a potential pick-up in speculative investment.
The Bank of Korea said in a report that prices of Dubai and Brent crude are staying at a high level despite an end of political turmoil in Libya and market jitters stemming from the eurozone debt crisis.
Prices of Dubai crude, South Korea’s benchmark, have been largely trading at more than $100 per barrel since they rose to $119.23 on April 28. South Korea, the world’s fifth-largest crude buyer, relies entirely on imports for its oil needs.
The BOK said that it would be difficult for oil costs to fall below $100 per barrel for a prolonged period mainly because the overall supply and demand situation is putting upward pressure on oil prices.
“There are concerns about the global economic slowdown and Europe’s debt crisis, but it seemed that they have yet to hit economic activities, given relatively sound industrial outputs in major economies,” said Noh Jin-young, an economist at the BOK.
“If the eurozone sovereign crisis eases and risk appetite revives, there is a chance that speculative money could flow back to the oil market, raising crude oil prices,” he added.
The central bank said that industrial output in the U.S., Europe and China maintained solid performance as the growth of global oil production slowed. It added that global oil inventory has begun to stay below its average over the past five years, raising chances that oil demand will likely grow.
Still-high oil prices are feared to put upward pressure on consumer prices. South Korea’s consumer prices grew 3.9 percent in October from a year earlier after topping the upper ceiling of the BOK’s 2-4 percent inflation target for the nine straight month.
South Korea’s consumer prices are widely expected to miss the BOK’s full-year target of 4 percent. The BOK’s 2012 inflation projection stood at 3.4 percent.
(Yonhap News)
