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Analysts predict oil prices to reach US$100 in 2008

Analysts predict oil prices to reach US$100 in 2008

Oil prices of near US$100 per barrel caused alarm in consuming countries in 2007 and analysts forecast another tense crude market next year with triple-figure records a real prospect.
Despite a murky outlook for the world economy, crude prices are seen settling at elevated levels, spelling more pain for consumers and a steady flow of petrodollars for the world's oil exporters.
From a low point of just below US$50 per barrel in January, prices doubled in 2007, hitting US$99.29 a barrel on November 21, an all-time record.
Oil forecasting is a notoriously difficult business, but few had expected such a run-up - apart from an analyst at investment bank Goldman Sachs who has achieved some fame for foreseeing early in 2005 a "super spike" to US$105.
"People at the beginning of this year would never have dreamt that prices would have reached such exalted heights," said a London-based analyst for the center for Global Energy Studies, Leo Drollas.
Goldman Sachs, one of the most active banks in the energy market, raised its price forecasts for 2008 by US$10 on December 12, with average benchmark U.S. prices now seen at US$95.
The price could reach US$105 by the end of 2008, it said.
The CGES sees an average of about 90 dollars in the first half of the year and Drollas said a spike to US$100 was a possibility, above all if a cold northern hemisphere winter increased demand for heating fuel.
"There are conditions in which we would see well over US$100 per barrel, such as a cool winter, tightness of OPEC supplies, or non-OPEC supply not growing as much as predicted," he said.
World oil prices on Monday traded above US$94 a barrel ahead of the Christmas holiday, underpinned by generally strong U.S. ecomomic data suggesting that energy demand in the world's largest consumer may not weaken as much as anticipated.
A U.S. report showed that consumers shook off a slump in housing and tight credit and boosted spending by a stronger-than-anticipated 1.1 percent in November.
The Commerce Department report also showed that personal incomes rose 0.4 percent, a notch weaker than forecast.
Prices are also being supported at the moment by lingering concerns about supply during the northern winter.
The United States has nonetheless been battling crises on two fronts. In the housing sector, prices are falling sharply and an increasing number of people are defaulting on home loans.
That in turn has led to tightening corporate credit conditions, notably among banks holding securities backed by U.S. home mortgages.
Despite prospects for slower growth, analysts at investment bank Merrill Lynch earlier this month pointed to upside risks to oil prices in early 2008.
"We start 2008 with the lowest OECD industry stocks recorded in four years, resulting in upside risks to near-term prices, particularly in the event of a colder-than-normal northern hemisphere winter," they said, upping their 2008 average price forecast to US$82.
The OECD area includes the 30 industrialized member countries of the organization for Economic Cooperation and Development.
The 13-member organization of Petroleum Exporting Countries is the only player in the oil industry capable of bringing down prices, but the cartel shrugged off calls for more crude at a December meeting in Abu Dhabi.
It is held responsible by many for the surge in prices in 2007 by restricting supplies to deliberately take down stock levels in industrialized countries.
"OPEC has not been pumping enough. It's as simple as that," said Drollas.


Updated : 2020-12-06 07:47 GMT+08:00