Oil prices rise, but unlikely to spike again

BEIJING, May 23 (Xinhua) -- Crude oil prices are
likely to continue rising, but there will be no major spike in the market in the
coming months as world oil consumption still remains weak, analysts said.

Global crude prices, which plummeted from 147.27 U.S.
dollars per barrel to below 40 dollars last year, have witnessed a moderate yet
steady rebound over the past months, reaching 61.5 dollars on Thursday at the
New York oil market, marking a three-month high.

The reason for the recent rally is that the U.S.
government reported a surprise decline in crude and gasoline inventories as the
driving season approaches, Wall Street Strategies' senior research analyst,
Conley Turner, said.

"The rally in oil is also supported by the fact that
there is a sense of growing optimism among market participants that the economy
is not getting worse and is in fact, turning a corner," Turner said.

However, analysts also warned that the current oil
price levels were not in line with the underlying weak global economic
conditions. They said that runaway crude oil prices were therefore unlikely to
be seen in the coming months.

"If you have a look at the fundamentals in the market
at the moment, the inventories in the U.S. are still at 19-year highs and
there's no real indication that demand has re-entered the market yet," Ben
Westmore, an energy analyst at the National Australia Bank, said.

The International Energy Agency (IEA) said on Friday
that global oil demand would hit a 28-year low this year because optimism about
an economic recovery was not reviving the appetite for energy.

The rebound in oil prices is largely connected with
the performances of the financial markets, instead of the balance of supply and
demand, the Paris-based organization said, adding that the world's oil demand
has shown no signs of recovery with the absence of fundamentals to back the oil
market.

Xie Guozhong, an independent economist in China, also
believes that the recent price rebound cannot be explained by analyzing the
balance of supply and demand, as financial markets play a major role in pushing
up prices.

The large scale stimulus packages launched by some
developed economies boosted capital flow into the international oil market
raising prices, Xie, a former Morgan Stanley chief economist for the
Asia-Pacific region, said.

Judging by the current global economic situation,
analysts said oil prices may occasionally rise above 63 U.S. dollars per barrel,
but it was unlikely to see any major price hikes this year. They said for the
most part oil prices would fluctuate between 50 and 60 dollars.

According to a short-term outlook released last week
by the Energy Information Administration of the U.S. Energy Department, prices
are expected to average about 55 dollars per barrel for the rest of 2009, and 58
dollars per barrel in 2010.