Rough times ahead : Analyst sees $150 oil within a month

[General Duke]

Analyst sees $150 oil within a month

JOHN PARTRIDGE

 

Globe and Mail Update

 

June 6, 2008 at 11:09 AM EDT

 

Record demand from Asia will likely send oil prices rocketing to $150 (U.S.) a barrel by July 4, a U.S. analyst predicted Friday, triggering an immediate jump of more than $6 to $134 a barrel in New York.

 

“We are calling for a short-term spike in oil prices,” analyst Ole Slorer at Morgan Stanley in New York told clients in a report. “Middle East oil exports are stable, but Asia is taking an unprecedented share.”

 

He said that the patterns of crude oil distribution from the Middle East are “mimicking” those seen towards the end of the third quarter last year, when he also predicted an oil-price spike based on projections of sharp inventory reductions in the Atlantic basin.

 

“That same pattern is now again upon us, and we are making an identical call, only this time, we are starting from a much tighter Atlantic Basin inventory,” Mr. Slorer said.

 

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U.S. inventories are down by 35 million barrels since March, he added.

 

“Middle East exports, the swing supplier into the Atlantic, is sending record volumes into Asia ... while supplies into the Atlantic are hitting rock bottom,” Mr. Slorer wrote. “This has caused ‘oil in transit' to the Atlantic ... to collapse by more than 20 million bbls since March.”

 

After jumping in Europe earlier in the day, the contract for light sweet crude to be delivered in July climbed to $134.06 on the New York Mercantile Exchange, up $6.27.

 

This was on top of a $5.49 gain Thursday, reportedly the largest single-day increase in the history of the Nymex contract.

 

In a separate report Thursday, Mr. Slorer also dismissed one of the latest theories as to why energy prices are so high in developed economies. This theory has it that fuel subsidies in emerging market economies are preventing oil demand being destroyed by high oil prices, but that mounting fiscal pressures will force governments to cancel the subsidies before too long.

 

However, Mr. Slorer argues that most countries with gasoline prices below the U.S. benchmark of $4 a gallon – thanks to subsidies – are themselves oil exporters, including Venezuela, Nigeria, Iran, Saudi Arabia, Kuwait, Qatar and the United Arab Emirates. He reckons they have no incentive to cancel those subsidies.

 

“Given a fixed level of domestic gasoline prices, the incremental revenue generated by shipping crude at inflated prices often more than offsets the additional cost of subsidizing local consumption,” he said. “We reckon that higher [crude prices] will only lead to higher subsidies in oil-exporting countries.”

 

As well, selling gasoline at “reasonable prices” is one way for the now cash-flush oil exporters to give something back to their people, something they need to do from a social perspective, he said.

 

The only thing that would lead to these countries reducing the subsidies is a dramatic fall in oil prices, Mr. Slorer added. “But this oil price drop will not be ignited by demand destruction resulting from gasoline subsidy cuts.”

[xiinfaniin]

This is scary.

[General Duke]

Imagine everyone using the buses in winter in MINNESOTA?

 

D

[Ducaysane]

I understand that Oil is a commodity that trades on the world market. Just like any popular product, will drive up the profits of the company that manufactures it and people will swarm to buy their stock. But going back econ 101, supply and demand, what is the demand that drove the price of the gas this high, which did not exist, let say a month ago?

 

I think it is high time this country invest public transportation.

[General Duke]

Greater consumption. More nations becoming more developed at a faster pace than any time in history and not enough new oil fields, insecurity in the Middle East.

 

Oil is not going to go down. So you are right its time they invested in Public transport which is terrible compared to the UK.

[Emperor]

^Are you saying the London transport I know is better the Yankees, the strikes and delays of the Underground and Buses that you may spend an hour at the Bus stop before it arrives...

 

Its scary, as we speak I can see BBC reports $139 a barrel, 1.30 Pound a litre in the UK...

[RedSea]

^Yeah it's. They only have one mini train here in Minnesota. That is not enough. Time to move....

[Emperor]

Looooooooooooool, Amerikooy meeshaada iga Joog... Duke it must taugh for you to tolerate the place

[Ducaysane]

Oil is traded in dollar, and as you know the value of the dollar is nose-diving in the currency market. Speculators in Wall Street are also making the matters worse just for their interest. Lock of refineries also contributes the problem. Alow sahal amuuraha.

[General Duke]

^^^Great points, its getting out of hand though.

 

Emperor, The US has some advantages over the UK. But its getting tough now.

[Naxar Nugaaleed]

oil is traded in dollars which is getting weaker every day. Supply remains the same but demand is going up more and more every because of developing economies in the east, how did people not see this coming? get in line for a toyota prius!

[Miskiin-Macruuf-Aqiyaar]

Let it reach $200 even. Reer North America calaacal badanaa. Reer Eritrea, one of the poorest countries you can find in the map, pay more than double what Americans are paying a litre.