When oil was at $42/barrel, word on the street was that up to $10 was froth due to speculation and political instability. So $30/barrel for 2005 doesn't seem that surprising at all.
A survey of 14 analysts and consultants conducted by Reuters forecasts that U.S. crude prices will slip to $30.12 a barrel next year, down 18 percent from a $36.77 average so far in 2004, on course to be the highest level since 1980. . . .Note that even if NYMEX prices go as low as $30/barrel next year, this is still above the old OPEC price-band ceiling of $28. And when you're predicting oil prices, would you really choose the equity analysts over the energy market specialists??
"We contend the next four years will be tough given supply pressures from both OPEC and non-OPEC sources that threaten the current market psychology," said Doug Leggate of Citigroup.
This year's gains have fueled speculation of a longer-term shift in energy prices as the higher cost of finding and producing enough oil to meet rising world demand forces a structural shift to higher prices.
"The more one looks beyond 2005, the more difficult it appears for the supply side to be able to catch up in time," the bank's Kevin Norrish and Paul Horsnell says. "This issue alone is enough to suggest that the back end of the oil price curve should stay very robust and still has scope to push up even higher."
So far most price pundits have made only modest upward revisions to their long-term forecasts. The projections are well below existing values on the crude price curve, which is trading at nearly $35 for U.S. crude in 2005 and around $29 for 2010.
The poll reveals a split between equities analysts and energy market specialists, with the latter inclining more to the view that Middle Eastern risks and tight inventories will ensure a stronger long-term oil price.