February 3, 2011 / 4:27 PM / 8 years ago

UPDATE 3-Oil price surging on demand, Arab unrest-IEA

* IEA fears $100 oil price will become “oil burden”

* U.S. Energy Dept says oil may hit $110 by end of year

* U.S. senator says oil shipments safe from Egypt protests

(Adds comments from IEA’s Richard Jones on $100 oil price)

By Tom Doggett and Ayesha Rascoe

WASHINGTON, Feb 3 (Reuters) - Stronger oil demand from rebounding economies and concern over unrest in Arab countries have pushed crude prices above $100 a barrel, the International Energy Agency told the U.S. Congress on Thursday.

Claims that speculators were behind the 25 percent rise in the oil price since September are not valid, IEA Deputy Executive Director Richard Jones told the Senate Energy and Natural Resources Committee at a hearing on the oil market.

“Data on supply-and-demand fundamentals for the fourth quarter of 2010 that has recently become available points more towards a market tightening due to stronger-than-expected demand in key consumers and a concurrent drawdown of commercial oil stocks,” Jones said.

“Reasons for this growth in demand include unseasonal weather patterns and better-than-expected global economic growth,” he said.

Senator Ron Wyden of Oregon said he disagreed with IEA’s narrow assessment of the cause of the rise in oil prices.

“I’m just concerned your approach gives short shrift to the possibility of speculation in the financial markets,” Wyden told Jones at the Senate hearing.

He said a variety of factors affect prices and Congress should be looking at the speculative component of energy prices.

Jones said oil prices have shot up over the last week in particular because of concerns that protests in Egypt may lead to a disruption of oil shipments through the Suez Canal and that unrest may spread to other oil-producing countries in the region.

The committee’s chairman, Senator Jeff Bingaman, said it “currently” appears unlikely that the protests will result in any disruptions in oil production or oil shipments.

Jones warned global growth could slow if oil prices stay above $100.

“Were prices to remain at this level for a sustained period of time ... oil expenditures would soon rise as a proportion of GDP, creating an ‘oil burden’ that could put a drag on the world economy,” he said.

Jones pointed out that at $100 a barrel, world oil expenditures would equal about 5 percent of global gross domestic product, which in the past has dampened growth.

“This rise in prices over the last few months brings the oil burden too close to this 5 percent mark for comfort,” he said.

Still, Jones said it was unlikely oil will stay above $100 a barrel for all of 2011, because OPEC has a large amount of spare oil production capacity, global refining capacity is in good shape and industrialized countries have ample oil stocks.

Meanwhile, the U.S. Energy Department’s analytical arm warned oil prices could go even higher.

There is a one in three chance that oil will be above $110 a barrel at the end of 2011, U.S. Energy Information Administration head Richard Newell told the committee.

EIA has officially forecast that oil will average $93 a barrel in 2011, but Newell said oil price forecasts are subject to a great deal of uncertainty.

“The market value of futures and options contracts...is telling us there is about a one in three chance the price of oil will be above $110 a barrel at the end of this year,” he said. (Editing by Russell Blinch, Marguerita Choy and David Gregorio)

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