For those who like to follow oil, here's an interesting pre-OPEC analysis:
theglobeandmail.com
Market players adjust to new reality ahead of OPEC meeting
By DAVE EBNER
Monday, March 14, 2005
OPEC oil ministers meet in Iran this week, a gathering that will be closely watched as market players debate where the price of the world's most popular commodity is headed.
The price of oil, based on the New York Mercantile Exchange benchmark price, closed at $54.43 (U.S.) a barrel on Friday, barely lower than the record high close of $55.17 set last October. Members of the Organization of Petroleum Exporting Countries have said there are no problems with the current price, according to statements made ahead of the group's first meeting in Iran in more than three decades.
"The [Iran] meeting may mark the end of cheap oil," said a Friday report in Tankerworld, an Oslo-based news service that follows the oil business.
Oil prices have soared higher in the past year on escalating demand for the commodity -- which is the source of gasoline and jet fuel -- and questions about supply. OPEC members have said they are not thinking about increasing production to meet higher demand and many industry players believe OPEC doesn't have much capacity to jack up the flow of oil in any case.
Still, many analysts have been somewhat perplexed in recent weeks, as they look at market indicators that are usually closely correlated with the oil price, such as the amount of oil in storage waiting for use in the United States. These figures suggest oil should be lower.
Some market players are adjusting to what seems to be a new reality. Peters & Co. Ltd., a Calgary energy investment dealer, last week predicted oil would average $50 a barrel this year, up from its previous forecast of $40. Peters did this "in deference to oil commodity market realities, despite contrary supply, demand and inventory fundamental indicators."
FirstEnergy Capital Corp., another Calgary dealer, said the price of oil will ease only if the growth in demand is curtailed, a process that could take several years. In a Friday report, FirstEnergy analyst Martin King said oil is still cheaper today, taking inflation into account, than it was during the energy crisis of the 1970s, which led to energy conservation. He suggested that a "sufficiently large enough" reduction in demand for oil might only occur if oil rises above $70 a barrel. |
