Analysts end forecasts of decline in oil prices - The Boston Globe
Analysts end forecasts of decline in oil prices - The Boston Globe
By Mark Shenk and Alejandro Barbajosa, Bloomberg News January 1, 2006
Wall Street oil analysts have given up calling for lower prices after missing the rallies of the past four years.
New York oil futures will average $60 a barrel in the first quarter of 2006, according to the median forecast of 25 analysts surveyed by Bloomberg. Prices will average $58 in all of 2006, the survey indicates.
''We are going to see the continuation of a very tight market, vulnerable to supply shocks and disruption," said Kevin Norrish, a director of commodities research for Barclays Capital in London. Norrish and colleague Paul Horsnell had the highest and most accurate forecast for prices in 2004.
Oil averaged $56.69 in 2005, $17 more than in 2004 and the highest in two decades of New York trading. Crude touched a record $70.85 in 2005, hurting consumer spending and sparking record oil-industry profits.
Credit Suisse First Boston analysts say Exxon Mobil Corp., BP PLC, Royal Dutch Shell PLC, Chevron Corp. and Total SA will probably earn $108 billion, the size of Venezuela's economy.
Oil futures have more than tripled since November 2001 as fuel demand rose, especially in China, the second-largest energy consumer. Hurricanes Katrina and Rita, the Iraq War, and civil unrest in Venezuela and Nigeria have contributed to high prices.
Oil analysts had predicted that prices would average $40.33 in 2005. Prices rose 33 percent in 2005, almost matching a 34 percent gain in 2004.
''The dynamic shifted," said Doug Leggate, senior oil analyst at Citigroup Inc. in New York. ''There was a growing perception that supply was running out. The doomsday scenario that stated OPEC couldn't meet demand and the Saudis wouldn't be able to increase output gained traction."
The prediction of dwindling oil supply was proposed in the June 2005 book ''Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," by Matthew Simmons. The chairman of Houston-based energy investment bank Simmons & Co. wrote that about 90 percent of Saudi Arabia's oil output comes from seven fields, including three that have pumped for more than 50 years. Some fields are expected to rapidly decline with few replacement sources, he said.
Goldman Sachs Group Inc. analyst Arjun Murti in New York, who roiled oil markets in March by saying crude may reach $105 a barrel, said in a report on Dec. 12 that his forecast may be conservative. He forecasts oil prices of $50 to $105 a barrel until 2009.
Wall Street firms have beefed up their energy-trading desks to benefit from high oil prices.
Morgan Stanley, the second-biggest US securities firm by market value, increased bets in commodities by 53 percent in its fiscal fourth quarter, faster than in any other market, as natural gas and electricity prices rose.
The firm's so-called value at risk, used by accountants to measure potential losses, in commodities averaged $46 million a day in the three months ending Nov. 30.
Neal Shear, who in April moved from running Morgan Stanley's commodities unit to become co-head of institutional sales and trading, got a $16 million year-end bonus, according to a company filing.
By Mark Shenk and Alejandro Barbajosa, Bloomberg News January 1, 2006
Wall Street oil analysts have given up calling for lower prices after missing the rallies of the past four years.
New York oil futures will average $60 a barrel in the first quarter of 2006, according to the median forecast of 25 analysts surveyed by Bloomberg. Prices will average $58 in all of 2006, the survey indicates.
''We are going to see the continuation of a very tight market, vulnerable to supply shocks and disruption," said Kevin Norrish, a director of commodities research for Barclays Capital in London. Norrish and colleague Paul Horsnell had the highest and most accurate forecast for prices in 2004.
Oil averaged $56.69 in 2005, $17 more than in 2004 and the highest in two decades of New York trading. Crude touched a record $70.85 in 2005, hurting consumer spending and sparking record oil-industry profits.
Credit Suisse First Boston analysts say Exxon Mobil Corp., BP PLC, Royal Dutch Shell PLC, Chevron Corp. and Total SA will probably earn $108 billion, the size of Venezuela's economy.
Oil futures have more than tripled since November 2001 as fuel demand rose, especially in China, the second-largest energy consumer. Hurricanes Katrina and Rita, the Iraq War, and civil unrest in Venezuela and Nigeria have contributed to high prices.
Oil analysts had predicted that prices would average $40.33 in 2005. Prices rose 33 percent in 2005, almost matching a 34 percent gain in 2004.
''The dynamic shifted," said Doug Leggate, senior oil analyst at Citigroup Inc. in New York. ''There was a growing perception that supply was running out. The doomsday scenario that stated OPEC couldn't meet demand and the Saudis wouldn't be able to increase output gained traction."
The prediction of dwindling oil supply was proposed in the June 2005 book ''Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," by Matthew Simmons. The chairman of Houston-based energy investment bank Simmons & Co. wrote that about 90 percent of Saudi Arabia's oil output comes from seven fields, including three that have pumped for more than 50 years. Some fields are expected to rapidly decline with few replacement sources, he said.
Goldman Sachs Group Inc. analyst Arjun Murti in New York, who roiled oil markets in March by saying crude may reach $105 a barrel, said in a report on Dec. 12 that his forecast may be conservative. He forecasts oil prices of $50 to $105 a barrel until 2009.
Wall Street firms have beefed up their energy-trading desks to benefit from high oil prices.
Morgan Stanley, the second-biggest US securities firm by market value, increased bets in commodities by 53 percent in its fiscal fourth quarter, faster than in any other market, as natural gas and electricity prices rose.
The firm's so-called value at risk, used by accountants to measure potential losses, in commodities averaged $46 million a day in the three months ending Nov. 30.
Neal Shear, who in April moved from running Morgan Stanley's commodities unit to become co-head of institutional sales and trading, got a $16 million year-end bonus, according to a company filing.
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