CERA sees potential oil rebound

HOUSTON (Reuters) - Current oil prices are not justified in the face of weak global demand and a glut of spare supply, but oil supplies could tighten in the next three to five years, energy analyst Daniel Yergin said on Monday.

U.S. oil futures rose more than 2 percent to a seven-month high of $68.29 a barrel on Monday due to rallying stock markets and sustained expectations for a global economic recovery.

But crude oil's biggest monthly gain in a decade has more to do with rallying equity markets and a weak dollar than actual oil demand, Yergin, chairman of IHS Cambridge Energy Research Associates (CERA), told the Reuters Global Energy Summit in Washington.

"The weakening dollar is part of it," Yergin said. "What's not part of it are the fundamentals of supply and demand which do not support a price like this."

There are few bullish signs to point to in the oil market, Yergin said. Global oil demand is down nearly 3 million barrels a day, erasing four year's worth of demand growth, and the market is struggling to digest the biggest spare capacity overhangs in 21 years at 6.5 million barrels per day.

But slack demand and low prices could spur big oil industry players to cancel or defer about 7.6 million barrels per day of planned expansions, which could lead to firmer oil demand down the road, Yergin said.

"The way you get to a crisis is five years and that's kind of how these cycles roughly go," Yergin said. "You could get back to a tight market in three to five years."

Another big question mark in the direction of global energy markets is new U.S. regulations to limit heat-trapping greenhouse gases, as well as a global push for efficiency measures, Yergin said.

Yergin, who won the Pulitzer Prize for his oil industry history "The Prize," said the industry has come full-circle on a cycle set in motion after the oil price shocks of the late 1970s.

Soaring prices set in motion a push to build smaller automobiles and develop alternate energy sources such as wind and solar, but the oil price crash of the 1980s stopped many of those initiatives in their tracks, Yergin said.

When oil prices hit their peak near $150 a barrel in July, many such initiatives came back into the spotlight.

"It's like a chasm has been closed," Yergin said. "It's like picking up the story from where we left off in 1980s."

(For summit blog: blogs.reuters.com/summits/)

(Editing by Lisa Shumaker)