(SINGAPORE) The global imbalance in supply and demand for oil will persist longer than expected and keep prices high through 2008, says the Economist Intelligence Unit (EIU).

Its latest global forecast sees significant upward revisions to its oil price estimates for the next five years.

Following an average of US$63.30 per barrel in the first half of 2007, Brent crude prices look set to average US$76.50 per barrel in the second half, implying an annual average of about US$70 per barrel, or 7 per cent higher on 2006, says the London-based firm.

While demand for oil has grown, Opec's production cuts and sluggish non-Opec output growth has caused supply shocks and a consequent surge in prices. 'Despite a small????increase in crude capacity, we doubt that Opec will release enough crude oil onto the market to ease the imbalance,' EIU says. It sees prices staying high at around US$69 a barrel in 2008 'as many of the factors behind this year's price rally run will continue'.

EIU, which sees the US economy growing a slower 1.9 per cent in 2007 amid a correction in the housing market, has also revised its US monetary policy forecasts. It no longer expects the US Federal Reserve to cut interest rates for the rest of this year, and forecasts that the key Federal Funds rate will stay at 5.25 per cent in 2008.

'This reflects our view that, as the Federal Reserve still considers inflationary pressures to be the main threat, it is unlikely to change its view that inflation remains its 'predominant' policy concern,' EIU said.

EIU's forecasts see global growth slowing from 4.1 per cent in 2006 to 3.5 per cent this year and next, and hovering just a tad below in the following few years. Overall, the 2002-2011 decade represents 'an unprecedented period of growth for the world economy', it notes. But downward risks for the period are substantial, it adds.

Is this article useful to you?