Energy execs worry oil rise just mood swing

By Braden Reddall

HOUSTON (Reuters) - A broad consensus about the need for oil prices to rise over time is not reassuring energy experts, who worry that the recent rally is driven simply by an improving "mood," and therefore very fragile.

Energy executives at the Reuters Global Energy Summit this week sounded unnerved by a surge in the U.S. benchmark oil price near $70 per barrel which, while less than half its peak last July, is double its level of mid-February.

That increase has come despite rising crude stockpiles and amid few signs that the world economy will turn around dramatically any time soon, they said.

"It does kind of feel like the market is getting ahead of itself. The demand has not increased," Larry Nichols, chief executive of Devon Energy Corp (DVN.N), said. "One can say that the rate of decline has slowed down -- that does not mean that the rate of decline has stopped."

Steve Farris, CEO of rival U.S. exploration and production company Apache Corp (APA.N), agreed that the rally was not well grounded in supply and demand fundamentals, and saw prices heading lower.

"It's more perception than reality," Farris said. "A lot of people think we bottomed out -- I tend to think otherwise. So I wouldn't be surprised to see a pullback in oil prices."

The executive director of the International Energy Agency, Nobuo Tanaka, added his voice to those doubting that the "green shoots" of economic recovery alone would drive more energy consumption.

"It seems to us oil demand data does not show up these green shoots yet, at least in the early part of the year," Tanaka said.

And among those who serve the oil and gas producers, there is also a feeling that the market for oil is sending the wrong signal, according to Richard Spears, vice president of oil services specialist and consulting firm Spears and Associates.

"It's been our firm's view that the fundamentals of the market would suggest a lower price -- a $40 or $50," Spears said. "In the range of that. Not $70."

Analysts and executives pointed to this week's closely watched American Petroleum Institute figures, which showed U.S. crude stockpiles down less than expected.

But prices were steady on Friday at just under $69 a barrel, after reaching above $70 for the first time in seven months.

"It's just the mood," said Aidan Heavey, CEO of Tullow Oil Plc (TLW.L), Europe's largest independent oil explorer by market value. "There's no shortage of oil."

Leading energy analyst Daniel Yergin, the chairman of IHS Cambridge Energy Research Associates, said global oil demand was now down nearly 3 million barrels a day, erasing four years of demand growth, and the market had its biggest capacity overhang in 21 years.

But Yergin, like the energy executives, told the summit the long-term fundamentals of oil ultimately point to insufficient supply, and he predicted another tight market in three to five years.

(Reporting by Braden Reddall, editing by Gerald E. McCormick)