Gas Week

EWN Publishing

World oil price nearly $US80 a barrel; could hit $US95 a barrel by the end of the year if OPEC keeps oil production capped at current levels

Posted by gasweek on 25 September, 2007

Stephen Wyatt reports “Global crude oil production is over 1 million barrels per day lower than last year, while demand is over 1 million bpd higher,” Goldman Sachs says in a recent report, according to The Australian Financial Review (4/8/2007, p. 21).

Crude oil price could hit $US95 a barrel: He tipped that crude oil price could hit $US95 a barrel by the end of the year if Organisation of the Petroleum Exporting Countries (OPEC) keeps oil production capped at current levels. The forces of demand and supply seem to be begging a price explosion.

Oil price below its record highs: In inflation-adjusted terms (real price terms) the current oil price is still $US12 a barrel below its record real price highs of $US90 a barrel (in today’s price terms) hit during the Iran-Iraq war in 1979-80. No mainstream analysts are forecasting $US150-plus oil and the current market is pricing oil for delivery in 2012 at about $US74 a barrel. No oil shock of damaging proportions here.

End of cheap oil: Nor is the market pricing in the alarmist Malthusian view that oil is running out. Commodities do not run out, they just become more expensive. As Beach Petroleum’s Reg Nelson says, the market is pricing in the end of cheap oil, not the fact that there will be dramatic oil shortages. Deutsche Bank forecast oil prices to hold above $US60 a barrel in the long term.

The Australian Financial Review, 4/8/2007, p. 21

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