US, China drive oil price: analysts

"China and the US are the current powerhouses of oil demand. It is these two countries that are driving oil demand at the moment and are responsible for the high oil prices."

Leo Drollas, analyst with the Center for Global Energy Studies research group

The voracious appetite of the US and China to devour enough energy to feed their growing economies is a key reason behind recent sky-high oil prices, according to analysts.

"China and the US are the current powerhouses of oil demand," said Leo Drollas, analyst with the Center for Global Energy Studies, following the research group's conference in Britain last week.

"It is these two countries that are driving oil demand at the moment and are responsible for the high oil prices," Drollas said.

New York's main contract, light sweet crude for delivery in August, struck US$60.95 last Monday -- the highest level since it was first traded in 1983.

In London the same day, the price of Brent North Sea crude oil for delivery in August hit a new record level of US$59.59.

Fears

The historic records were reached amid fears, which have since eased, that a tightening global supply would struggle to meet keen fourth-quarter demand during the next northern hemisphere winter -- especially from China and the US.

Oil prices have leapt by approximately 45 percent since the start of the year to last week's historic levels.

"Everybody agrees that the rise in oil is mainly caused by demand," said Eric Chaney, chief economist at Morgan Stanley.

"So the market will probably push prices up until somebody says it's too expensive to buy," he said.

The emerging economic power of China saw its economy surge last year, rapidly expanding by 9.4 percent.

The economy of the US -- the world's No. 1 oil consumer -- grew at 3.8 percent over the same period. Europe meanwhile recorded average growth of some 1.5 percent.

"The global economy is less sensitive to oil prices than it used to be, but oil still matters," Chaney said, adding, "Oil will bite on global growth at some point and only then, demand for oil will slow."

The US and China now represent one third of total global oil consumption.

Combined

Their combined crude demand for this year is forecast at 28 million barrels per day (mbpd), out of a total worldwide demand of 84.3 mbpd, according to recent data from the International Energy Agency.

The two countries' total oil consumption was estimated to rise by 2.7 percent this year, compared with the previous year -- an increase of 740,000 barrels per day.

That means Chinese and US demand for oil accounts for 42 percent of the total anticipated 2.2 percent growth in global oil demand this year.

Demands

Meanwhile China, a net importer of oil for the past decade, is hurriedly looking to meet the demands of its economy. Last year it overtook Japan as the second-largest net importer of oil.

Underlining China's drive to secure energy resources overseas to sustain its rapid economic growth, state-run energy firm China National Offshore Oil Corporation announced a bid on June 23 to buy US oil major Unocal for US$18.5 billion cash, trumping a rival offer by Chevron Corp.

However, the high cost of crude could force China to delay the filling of its strategic reserve indefinitely, according to officials involved in the project.