Oil Industry Headlines: Week of October 5
In an interview with Fortune Magazine, Goldman Sachs investment bank analyst Jeffrie Currie predicted that oil has an almost 50% likelihood of reaching $90-$95 a barrel this winter. Currie cited disappointing production from Non-OPEC producers, increasing domestic demand within OPEC countries and rising extraction costs as driving forces behind anticipated record prices. On the subject of gas prices, Currie provided valuable insight into why record prices at the pump didn’t do much to curb demand. “It’s the price change that matters,” he said. “In September 2005, retail gasoline prices reached an all-time high of $3.11 a gallon. That was a 70% year-over-year increase, and it killed off U.S. gasoline demand and significantly impacted economic growth. This May prices reached a new all-time high of $3.25, a 12% increase year-over-year, and it didn’t even make the headlines. The consumer had already adjusted to the $3 level.”
Meanwhile, as the price of oil hovers above $80, the International Energy Agency is only slightly reducing its demand prediction for the end of 2007. In a report released this week, the IEA revised its demand forecast for the fourth quarter downward by 320,000 barrels of oil. The Oil Market Report attributes the downward revision to concerns surrounding the U.S. subprime housing market, an anticipated mild winter and the substitution of cheaper fuels (such as natural gas) for non-transportation energy needs. However, the report warned that unforeseen factors could drive demand up at a time when supply margins are already tight. “There are other, possibly more substantial unknowns, which could work both ways . . . Geopolitical issues could swing either way, with output paths from Iraq, Iran and Nigeria particularly unclear. Data risks will be resolved with time, and there is the omnipresent risk of unforeseen disruptions” the IEA stated in a September report.
Published Friday, October 5th, 2007 at 3:49 pm and filed under Industry News.