Higher Oil Prices Spurring E&D Activities

Higher oil prices is prompting more exploration and development activity among oil producers, according to the Financial Times of London. The long-term price floor for oil is now seen to be $40/barrel, and companies are changing their activities accordingly. But interestingly, the U.S. EIA and the IEA don't see eye-to-eye either on worldwide demand nor supply:

The IEA on Wednesday revised downward its demand forecast for 2005, while the EIA did the opposite just the day before. The IEA now expects oil demand this quarter to be 83.7m b/d, while the EIA has a forecast of 84.9m b/d a difference of 1.2m b/d, which is the equivalent of Algeria's entire production.

The agencies' supply estimates are not much more in tune. Non-Opec production is expected to increase by 1.4m b/d this year, according to the IEA, while the EIA, expects growth of only 800,000 b/d.

The U.S. EIA recently upgraded its price forecast for oil to $59/barrel through September.