It was over
a year ago now that people, including myself, started to say
we would never see fifty-dollar oil again. Wrong on that one.
In fact, [game show buzzer noise]. Some economists predicted
the price of oil would collapse, but they got the reasons wrong,
very wrong. The ongoing meltdown blindsided the predictors as
the pullback in demand for energy proved to be far more severe,
and more global, than was generally expected.
2008 was the
craziest year ever energy-wise. People wonder what in the heck
2009 has in store. Let's flip through the papers and see if we
can find some bold souls inching precariously out onto limbs.
article in the Houston Chronicle tells us:
firm CreditSights slashed its average price outlook to $48.75
a barrel from $75, mirroring similar moves in recent weeks by
The same article
notes that the US Energy Information Administration cut its 2009
estimate to $43.25.
we expect prices to be around $50 for WTI and Brent" this
year, Francisco Blanch, head of commodities research at Merrill
Lynch & Co. in London, said on Bloomberg television.
as the safe consensus. From the same
how low could it go:
have to drop into the high $20s before it finds its feet,"
said Bill O'Grady, chief markets strategist at Confluence Investment
Management in St. Louis. "We are looking at a huge drop
We could be in the high twenties by the time I finish this blorg
Baskin of the WSJ sees continued low prices:
The cycle is
unlikely to be broken until the storage crunch eases at Cushing.
More of the
Oil is likely
to hit $60 a barrel or higher by July because by then supplies
will be shrinking at a faster rate than demand, a US-based fund
manager told Reuters on Thursday. But Adam Robinson, director
of commodities at Armored Wolf, said prices could test new lows
before the market starts to tighten.
quoted Australian analyst Gerard Rigby, sounding hopeful yet too gun-shy to
offer any solid numbers:
cutting and that should start impacting inventories," Rigby
said. "Economies will start turning around, and I think
demand is bottoming out."
What about the
long term outlook? David
Kent of Rigzone
has this to say:
Will oil prices
drop to $20, or will they catapult to $200? In the short-term,
it is anyone's guess. In the long-term, the answer is simple
-- if we use a little history and a bit of common sense. Growing
up in an oil family and working within the industry for the past
decade, I have experienced some interesting times. The oil and
gas industry is notorious for its cyclical nature and dramatic
ups and downs. ... I do not believe low commodity prices and
rig counts will be here for long. Simply put, our industry rises
and falls with the price of oil and gas, and two simple truths
will provide upward pressure on prices for decades to come. Those
truths: 1.) supply is finite, and 2.) the world population continues
to grow at a tremendous rate.
Heap big assumption
there in that last sentence, it seems to me.
still looming in the future. How far off is the question. So
far, the effect of the economic collapse on the energy markets
has been badly underestimated by, well, everybody. As of mid-January,
uncertainty still rules.