Commodity Strategists: Oil May Average $93 in 2007

[jpak]

http://www.bloomberg.com/apps/news?pid=10000082&sid=aWJgsbCFqveY&refer=canada

Sept. 9 (Bloomberg) -- Oil may average $84 a barrel next year, $93 in 2007, and $100 in the fourth quarter of 2007, as demand outpaces supply, Canadian Imperial Bank of Commerce's chief economist said, jumping ahead of other analysts who are trying to catch up with surging prices.

Rising consumption in China is straining supplies, and damage from Hurricane Katrina to Gulf of Mexico facilities will delay new oil projects in addition to cutting output now, Canadian Imperial's Jeffrey Rubin wrote in a Sept. 7 report. Global supply will be as much as 2.4 million barrels below projected demand by 2007, and the gap will only be closed as rising prices slow demand growth, Rubin wrote.

``We estimate that 1.8 million barrels per day of consumption must be squeezed out next year through the impacts of higher prices,'' Rubin wrote. The gap between supply and demand grows as much as 3 million barrels a day by 2008. Global oil needs are almost 84 million barrels a day now.

The 50 percent rally in oil this year stymied forecasters. They predicted an average $39 a barrel this year, according to the median of 24 analysts, strategists and economists Bloomberg surveyed last December. Oil touched a record $70.85 in New York on Aug. 30, a day after Katrina hit the Gulf Coast. The average price so far this year is $54.77.

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[hatrack]

1. Say goodnight, GM

"Goodnight, GM!"

[chicagiana]

2. Self fullfilling prophecy ...

The analysts are now talking about outrageous oil prices in the future. So now the speculators are going to drive oil prices through the roof until the bubble bursts.

I have no doubt that peak oil is looming. But I doubt it is so soon.

But I tell you what everybody. As an eco-friendly speculation effort, you may want to consider investing in bicycle, motorcycle, and motor-scooter companies.

If gas gets to $5/gallon, you will see a LOT of people trading in their SUVs for Honda motorcycles.

[Massacure]

3. Soon is in the eye of beholder. Hubert predicted 2010-2012.

[phantom power]

4. It's worse than that. They won't be ABLE to trade them in.

In fact, it's happening already. Some car dealers are refusing to buy SUVs. And gasoline is "only" around $3/gallon, quite a bit less then $5/gal.

Basically, there will be millions of people with $40K investments that are suddenly yard-ornaments. They won't be able to afford using them, and they won't be able to get rid of them.

Schadenfreud aside, that's not going to be a good thing, for anybody.

[dcfirefighter]

5. $93 oil mean gas is less than $4

$70/bbl gets $3.19/gal around here, leaving $1.53/gal to pay for refine, ship, retail, and profits.

At this markup, $93/bbl oil would mean gas at $3.88. However, the reduction of demand due to high prices might close the markup, and 2 years may be enough time for some elasticity in the fuel market to show up.

[Dogmudgeon]

6. The new conservation-consciousness starts this Winter

Fuel oil and heating gas are headed for big mark-ups. The "official rumor" is for a 71% increase, but even half of that would cause significant hardship for a lot of people.

Most oil heat customers are not even being allowed to lock-in prices for the winter.

--p!